Goldman Sachs Raises China Stock Index Forecasts

Goldman Sachs (GS) raised on Monday its Chinese stock index forecasts for exchanges in the mainland and Hong Kong as stimulus measures revive the economy.

In a note released today Goldman projected China’s CSI 300 Index (which tracks stocks traded on the two mainland exchanges in Shanghai and Shenzhen) to reach 2,600 pts by year-end, up from an earlier forecast of 1,980. The Hang Seng China Enterprises Index prediction was raised to 10,300 from 8,900 and the shares were upgraded to “overweight.”

From Bloomberg: “China’s aggressive domestic policy stimulus appears to be working to offset the weakness in the external sector,” the note by strategists led by Hong Kong-based Timothy Moe said. “Greater confidence in Chinese growth also makes us incrementally more positive about the effectiveness of regional stimuli, and growth prospects.”

A resurgent China should assist the recovery of linked economies such as Hong Kong and South Korea, the report said. Corporate earnings are likely to stabilize and improve into 2010, the strategists said.

Last week Goldman increased its estimate for China’s economic growth in 2009 to 8.3% from 6%.

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