Finding the money: India, China markets are golden geese for Goldman Sachs

The intensifying trade war between the world’s two-largest economies has once again weighed on Asian equities, after China and the US were reported to have struggled to agree on a schedule for trade-related meetings.

The region’s benchmark MSCI Asia Pacific Index declined for a second day, and has been range-bound over the past few weeks.

Given the stalled trade talks and uncertainties over the global economy, the market outlook has become even cloudier, even for longstanding bulls such as Goldman Sachs Group Inc.

Strategists at the investment bank further trimmed their 12-month target for the MSCI Asia Pacific (ex-Japan) Index by 1 per cent to 515 points on an earnings slowdown — implying close to 4 per cent upside from Monday’s close. 

 

However, for the rest of the year, the bank sees the gauge little changed. Still, Goldman pointed out that money could be made in countries such as India, China and Indonesia, whose benchmark indices may see more than 10 per cent returns over the next 12 months in US dollar terms.

The reasons aren’t new. 

For China, policy support from authorities may offset the softening economy, said the investment bank. The country’s relatively better earnings and more attractive valuations also make the investment case stronger. 

In addition, light investor positioning and an increased inclusion in MSCI indices are making stocks appealing.

The case for India shares some of these similarities — policies, good earnings, reasonable valuations, and insulation from global geopolitical risks.