Goldman forecasts 30–40% gain for China indices by end-2027

Investing.com -- Goldman Sachs expects Chinese equities to climb 30–40% and reach record highs by the end of 2027, saying the market is entering a more durable phase after a series of drawdowns since 2022.

The bank said the “pro-market policy window is open,” underpinned by fiscal and monetary easing, structural reforms, and improving corporate governance.

In a report titled ’A Slow(er) China Bull Market’, strategists led by Kinger Lau argue that the key drivers include renewed growth momentum, inexpensive valuations, and rising equity inflows.

“We now call for a more sustained uptrend, forecasting key indexes to rise 30–40% and reach all-time highs by end-2027,” they wrote.

The team also projects about a 30% gain over the next two years, driven by “low-teen trend profit growth and moderate P/E expansion.” They said the equity cycle is shifting “from Hope to Growth,” where profit growth typically becomes the main engine for returns.

The strategists flagged that left-tail policy and growth risks have compressed, while stimulus measures and a shift toward a more balanced five-year plan support the outlook.

They said earnings growth could accelerate to low-teen levels as artificial intelligence, “anti-involution” reforms, and the “Going Global” strategy lift profitability. They added that AI has “changed the game for earnings,” while improved productivity and easing competition have “reignited hopes for profit reflation.”

Valuations remain attractive, with Chinese equities trading at mid-range price-earnings ratios and significant discounts to developed markets. "Right tail from AI and liquidity overshoot looks attractively priced," the strategists said, noting that easing global and domestic interest rates could further boost multiples.

Goldman estimates fair value for MSCI China at 13.7 times earnings, suggesting room for re-rating as sentiment improves.

The strategists also see strong capital inflows supporting the rally. They pointed to “trillions of dollars of potential Chinese asset reallocation flows” as households and institutions shift from savings and property into equities. External investors, meanwhile, are returning to China amid diversification needs and persistent underweights.

Overall, Lau recommends investors “buy the dip as the bull run unfolds” and focus on alpha. The bank maintains an Overweight stance on China within its regional allocation, favoring internet, AI technology, insurance, and materials stocks.