Goldman Sachs: Pressure on China’s stocks could extend to Asia

Global Investment Bank strategists Goldman Sachs wrote in a research note that the extension of China’s real estate market pressures to the rest of Asia would slow profits and returns in the region, and thus; Lowering MSCI targets for Asia and the Pacific, excluding Japan.

Experts, including Timothy Mo, said: “We are reducing our forecast for profit growth in Asia for 2023 from 0 to minus 2% taking into account China’s revised estimates due to real estate risks as well as the country’s relations with Asia. This includes profit cuts in Australia, Hong Kong and Malaysia. “

The Goldman Sachs Group of Experts has reduced the MSCI Asia Pacific Equity Index, excluding Japan, by 12 months to 555 from 580. This means a 10% return on the index from Thursday’s close, as opposed to a forecast of a previous 23% rise on agreed estimates of equity targets, according to data compiled by Bloomberg.

Chinese real estate stocks are close to losing all the gains they made during a huge recovery during last year’s reopening of the economy, a suspicious phase that could increase fears about China, and the potential for its problems to widen.

Global investors shed the country’s blue chip stocks during the longest period of outflows on record. Emerging market fund holdings were also about 100 basis points lower by the second quarter, a further decline from March’s 24 basis point levels.

Goldman Sachs’ move to lower its forecast for Asia and the Pacific excluding Japan comes a few days after it cut its Chinese stock outlook for the second time in three months, citing growing pressure in the real estate sector and a lack of strong government stimulus.

Today’s strategists have also lowered their target for the index over three months to 505 from 540, and the target for 6 months to 530 from 560. Experts also maintained their long-term recommendations to increase equity purchases in South Korea, Japan and China in Asia, based on next year’s profit outlook, improved corporate governance and potential supportive policies as supporting reasons.