Bullish on the Chinese stock market! Goldman Sachs: The current rally is being driven by a healthier structure, and valuations are not too high.

On September 19th, at a media exchange event hosted by Goldman Sachs, the chief equity strategist for the Asia-Pacific region, Mu Tianhui, and the chief China equity strategist, Liu Jinjin, presented their latest views. Mu Tianhui believes that the environment of the Federal Reserve cutting interest rates and the devaluation of the US dollar overall benefits the stock market, especially supporting the performance of Asian markets. Liu Jinjin stated that Goldman Sachs is bullish on A-shares and Hong Kong stocks, and has an overweight position in both markets. In terms of valuation, there are no signs of overheating at the moment. The median P/E ratio of MSCI China Index components is around 17 times, slightly higher than the historical average; the median P/E ratio of the Shanghai and Shenzhen 300 Index is 18 times, within the historical average range. Compared to the yield of 1.8% on Chinese 10-year government bonds, the stock market earnings yield still has a significant advantage. Globally, compared to the 23 times P/E ratio of US stocks and other emerging markets, Chinese valuation is not considered high. He also mentioned that the valuation of A-shares is still supported and has not overheated, with retail investor sentiment improving but not reaching a frenzy level. Liu Jinjin emphasized the importance of the "anti-inner loop" policy, believing that if the policy continues to be implemented, the average annual growth rate of corporate profits in the next few years is expected to increase by about 2%, significantly improving corporate profitability. In terms of choosing between A-shares and Hong Kong stocks, Liu Jinjin believes that it should not be a simple either-or decision, but rather selecting the best targets from both markets. Liu Jinjin stated that for example, the internet sector is more concentrated in Hong Kong stocks, while A-shares offer more investment opportunities in areas such as robotics and AI.