Goldman Sachs Backs Chinese Equities as Markets React to Economic Slowdown and Tariff Concerns

U.S. listed Chinese stocks, including Alibaba Group Holding BABA, Baidu, Inc BIDU, JD.com, Inc JD, PDD Holdings Inc PDD, Bilibili Inc BILI, NIO Inc NIO, XPeng Inc XPEV Li Auto Inc LI remained on investor watchlist on Monday.

Mainland China’s benchmark CSI lost its sheen as the domestic regulators strived to reassure markets following equities and the renminbi’s extended losses amid weak economic data and as President-elect Donald Trump prepares to take charge.

China’s Shanghai and Shenzhen exchanges conducted discussions with global investors to reassure them about “solid fundamentals and resilience,” and the central bank reaffirmed its plans to maintain the currency stable despite Trump’s tariff threats, the Financial Times reports.

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Investors kept spending on long-dated sovereign debt over possible easing in monetary policy.

Jason Lui of BNP Paribas justified the domestic selloff to the FT as investor profit-taking ahead of Trump 2.0 uncertainties.

FT reports that Kevin Liu of CICC attributed the domestic selloff to weak manufacturing data, the strength of the dollar index, and Trump’s return.

China is set to showcase its economic policy agenda in March.

Winnie Wu of Bank of America told the FT that the worst of derating is over for Chinese equities.

Goldman Sachs told the SCMP it expects China to focus on fiscal measures rather than rate cuts to drive stock market gains. It cited correlations between policies like the reopening measures after the 2020 pandemic and stimulus packages that triggered stock rallies.

The brokerage had a bullish take on Chinese equities in November.

Goldman Sachs flagged that Chinese equities, largely backed by domestic factors, offer relatively higher diversification benefits versus risky assets moving in tandem.

Conversely, UBS Global Wealth Management slashed its November forecast for Chinese stocks, citing U.S. tariffs and weaker-than-expected stimulus.

Since September, China has slashed thresholds for property purchases, swapped local government debt, and subsidized consumption, leading to a stock market rally.

Last week, reports indicated China’s Caixin/S&P Global manufacturing purchasing managers’ index for December missed the analyst consensus of 51.7, reflecting a slowdown as exports weighed on demand amid current tensions.

Reportedly, China targets a special treasury bond sale of 3 trillion yuan ($411 billion) in 2025 versus 1 trillion yuan in 2024 to counter potential U.S. tariffs on Chinese imports.

It aims to drive consumption through subsidy programs encompassing railways, airports, electric vehicles, robotics, semiconductors, and green energy.

E-commerce juggernaut Alibaba is hailed as China’s tech barometer. Investors can gain exposure to Alibaba through First Trust Indxx Innovative Transaction & Process ETF LEGR and American Century ETF Trust Avantis Responsible Emerging Markets Equity ETF AVSE.

Price Actions: BABA stock is up 0.70% at $86.15 at the last check on Monday. PDD is up 2.55%.

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