Goldman Sachs: “Chinese stocks to rise 20% this year…10 names to watch”

China’s stock market is expected to extend its solid run this year. Analysts say inflows will be supported by the spread of artificial intelligence (AI) technology, improving corporate earnings and government support measures.

Goldman Sachs on the 7th (local time) forecast that the Morgan Stanley Capital International (MSCI) China Index would rise 20% this year. It said growth at information technology (IT) companies such as Alibaba and Tencent would lead the index higher. It also projected that the CSI 300 Index—comprised of large-cap stocks listed in Shanghai and Shenzhen—would reach the 5,200 level, up 12% from a year earlier. The MSCI China Index and the CSI 300 Index rose 29% and 18%, respectively, last year on the back of a DeepSeek-related tailwind. The Shenzhen Composite Index, which has a high weighting of innovative companies, surged 30%. Goldman Sachs said, “This year’s share-price gains will be driven entirely by corporate earnings,” adding that “China’s AI technology and global strategy, along with policies aimed at curbing domestic backsliding, will translate into rising corporate profits.” A recent pickup in initial public offerings (IPOs) is also stimulating investment demand.

Chinese regulators are accelerating capital-market reforms after allowing the fast-track listing of unprofitable tech startups in areas such as AI and biotech in June last year. Via this route, Moore Threads and MetaX—listed last month on the STAR Market (科创板), the Shanghai Stock Exchange’s tech-focused board—drew attention after soaring 693% and 425%, respectively, on their first trading day. This year, too, a string of listings is in the pipeline—including AI startup MiniMax and promising semiconductor name ChangXin Memory—raising expectations that the market will gain fresh momentum.

Goldman Sachs expects the technology, media and telecommunications (TMT) sector to stand out this year, citing improved corporate results as AI capital expenditure rises. The investment bank selected 10 Chinese companies it said could go head-to-head with the U.S. “Magnificent Seven,” including Tencent, Alibaba, CATL, Xiaomi, BYD and Meituan. Tencent is applying its in-house generative AI model, “Hunyuan,” across areas such as gaming, fintech and cloud services. Alibaba developed its own AI model, Qwen, and officially launched its AI assistant app last year. It said it plans to invest 380 billion yuan (about 79 trillion won) in AI and cloud infrastructure. Xiaomi also unveiled its AI model “MiMo.” Last year it said it plans to invest 24 billion euros (about 40 trillion won) over the next five years in areas such as AI, operating systems (OS) and chipsets. These names are estimated to account for about 40% of the MSCI China Index.

Goldman Sachs said, “The 10 companies’ earnings are expected to grow at a compound annual rate of 13% over the next two years,” adding that “even amid risks such as recession concerns and geopolitical tensions, the low valuation of Chinese equities (share prices relative to earnings) will help cushion downside risk.” The firm maintained an “overweight” view on mainland China A-shares and Hong Kong-listed H-shares.

Reporter Cho Ara rrang123@hankyung.com