Goldman Sachs has raised its target for Chinese equities, driven by optimism surrounding the country’s technological advancements, particularly the emergence of DeepSeek, an AI model.
Strategists at the investment firm now expect the MSCI China Index to reach 85 over the next 12 months, an increase from their previous target of 75, signaling a potential 16% rise from its most recent close. Similarly, the target for the CSI 300 Index has been adjusted upward to 4,700, up from 4,600.
The rise of DeepSeek and other Chinese AI models has sparked a positive shift in investor sentiment regarding China’s tech sector. Goldman Sachs believes that widespread adoption of AI in China could boost earnings-per-share by 2.5% annually over the next decade, which could enhance the fair value of Chinese equities by 15% to 20% and attract significant inflows of capital, potentially as much as $200 billion.
Goldman joins a growing list of Wall Street firms showing a bullish outlook on Chinese stocks. Recently, strategists at Morgan Stanley, JPMorgan Chase, and UBS have expressed similar optimism. Notably, the head of multi-strategy equities at Man Group has singled out Chinese stocks as one of the year’s highest-conviction trades. These calls are largely fueled by the belief that China’s recent technological breakthroughs, especially in AI, could offer more sustainable growth compared to previous policy-driven recoveries.
Goldman Sachs has consistently maintained a positive stance on Chinese equities, even during periods of market downturns. For example, last May, the firm raised its MSCI China target to 70 from 60, a prediction that came amid a challenging market environment. Following a rebound in late September, the firm’s more recent forecast of a 20% potential gain by the end of 2025 has proven timely, with Chinese stocks rallying in the early part of the year.
This surge in market confidence is reflected in the performance of major Chinese tech stocks. Alibaba, for example, saw a 24% jump after announcing a partnership with Apple to enhance its AI capabilities in China, with investors eagerly awaiting the company’s upcoming earnings report.
The overall sentiment surrounding Chinese equities has been improving, driven by optimism regarding technological innovation, with some analysts suggesting that the recent rally could be more resilient than previous ones, as it is underpinned by micro-driven innovation rather than macroeconomic policy changes.
In the broader market, the outlook for Chinese stocks has contributed to increased investor interest in other global equities, including European markets like the pan-European STOXX 600 index, which has seen consistent gains in recent weeks. However, uncertainties remain regarding geopolitical factors and upcoming policy decisions, with central banks in Australia and New Zealand expected to adjust interest rates in the near future.
