Goldman Sachs' Liu Jinjin: Valuation of Chinese stocks back to reasonable levels, the market will be driven by profit growth in the second half of the year.

Goldman Sachs' Chief Stock Strategy Analyst in China, Liu Jinjin, said in a media interview that global investors' interest in Chinese stocks has significantly increased. With the valuation of Chinese stocks returning to a reasonable level, the MSCI China Index is valued at about 12 times. In the second half of the year, the market will be driven by profit growth, with individual stock performance becoming more differentiated. However, he believes that private companies have higher profit growth potential. He believes that in the overall environment, private companies still have a competitive advantage. In a fiercely competitive industry, leading companies still have advantages in research and development and capital expenditure. In the medium to long term, these companies' market share should be able to further increase, leading to better profitability. On the other hand, due to intense competition in the domestic market, many Chinese private companies have chosen to "go global" in recent years, but they have encountered the China-US trade dispute. Liu Jinjin said that even if Chinese exports are subject to tariffs, they still have a profit margin advantage. Therefore, tariffs have not changed the trend of "going global", but have actually accelerated it. Many European friends around him have bought Chinese goods. More importantly, in addition to exporting goods, China will also export intellectual property, such as Labubu. Some biotechnology stocks also sell new drugs to large pharmaceutical factories, reflecting the upgrading of China's industrial chain. He pointed out that with the significant changes in private companies' investment stories, from the perspective of thematic investment, you can build a core portfolio from Goldman Sachs' selection of the "Top Ten Private Enterprises", but it is not a choice between private and state-owned enterprises, it can be balanced. With the weakness of the US dollar, global investors are increasingly seeking diversified investment allocations, and A and Hong Kong stocks are among the beneficiaries. Liu Jinjin pointed out that considering the slowdown in US economic growth, trade issues, and US debt, the softening of the US dollar is a long-term trend. Therefore, the theme of diversified investment is receiving attention from every investor. "Diversification does not mean they are shorting US stocks or liquidating all US stock positions, but currently the allocation to the US is relatively high, so it has shifted from overweight to neutral." He pointed out that for investors in Asia or global allocations, aside from Europe, the market with the best liquidity is China. In addition, China itself has new investment opportunities, including AI, going global, and new consumer concepts. He described these as opportunities for "rising tides lift all boats", hence the significant increase in global investors' interest in Chinese stocks.