Goldman Sachs Issues Another Positive Outlook: RMB Shows Resilience, Chinese Stocks to Further Benefit!

Goldman Sachs analysts noted in a Monday report that the Chinese yuan has demonstrated resilience amid the China-US trade dispute, and its further appreciation is expected to benefit China's stock market.

In its latest report, Goldman Sachs wrote that a 1% appreciation of the Chinese yuan against the US dollar could boost Chinese stocks by 3%, driven by factors such as improved corporate earnings prospects and increased foreign capital inflows.

The report stated that the outlook for the yuan supports Goldman Sachs' overweight stance on Chinese stocks, and under a scenario of a stronger yuan, consumer discretionary, real estate, and brokerage stocks typically perform well.

Goldman Sachs pointed out that the reasons for the yuan's stability during this tariff war include interventions by the People's Bank of China, the enhanced competitiveness and diversification of China's export sector, the undervaluation of the yuan, and the demand for asset diversification following the broad weakness of the US dollar.

During the 2018 tariff war in Trump's first term, the yuan depreciated by up to 13% against the US dollar, a stark contrast to its current appreciation. As of press time, the US dollar-yuan exchange rate stood at 7.16804.

Goldman Sachs forecasts that the US dollar-yuan exchange rate could reach 7 within the next 12 months. The institution also noted that yuan-denominated assets will continue to attract foreign capital, but the pace of net southbound purchases may slow down in the coming months.

The wealthy are taking action

As of last Friday, the Hang Seng Index had achieved seven consecutive weeks of gains. Although tariff uncertainties in early April triggered a significant market sell-off, investors' optimism towards Chinese stocks remained unchanged and was further strengthened after China and the US reached a mutual concession agreement.

In April, Goldman Sachs twice lowered its forecast for the MSCI China Index, but raised it again in May after tariff risks were contained, increasing its earnings growth forecasts for the index in 2025 and 2026 from 6% and 7% to 9%, and raising the target price for the MSCI China Index over the next 12 months from 78 to 84.

Note: Trend of iShares MSCI China ETF

Meanwhile, a senior executive at Standard Chartered Bank stated that wealthy investors have not halted their investments due to tariff threats, believing that now is an excellent time to buy Hong Kong and mainland Chinese stocks.

Raymond Ang, Global Head of Private Banking and Wealthy Clients for Greater China and North Asia at the bank, told the media that his private banking and wealthy clients are highly active in investing, and have redeemed their long-term fund positions linked to macroeconomic themes or specific sector funds, reallocating funds into Hong Kong and mainland Chinese stocks, as well as high-quality Chinese government bonds.