Goldman Sachs's Top Asia Banker Says China Stock Rally Has Room To Run

Goldman Sachs Group Inc.’s top Asia banker sounded an optimistic note on Chinese equities amid resurgent flows and said the firm is hiring in Hong Kong and India.

“What we’re hearing from our clients and investors is sentiment has improved” around China’s stock market, said Kevin Sneader, the firm’s president of Asia-Pacific ex-Japan, in an interview with Bloomberg Television on Wednesday. “China still faces many challenges, but this rally in the equity markets has got some legs.”

Despite a sluggish economic backdrop, Chinese stocks are surging. The benchmark CSI 300 has gained around 10% since the end of July, compared with just 1.6% for MSCI’s all-country index. Optimism that China’s breakthroughs in artificial intelligence and efforts to cut overcapacity will revive growth have helped fuel the gains.

Last week, Goldman strategists including Kinger Lau raised their year-end price target for the CSI 300 index, citing factors including attractive valuations, high-single-digit trend profit growth, retail interest and potential asset reallocation.

Sneader in January said that clients were waiting to see if Chinese authorities push out major stimulus measures. Longer-term investors still want more clarity, he said Wednesday, but hedge-fund flows into the country have improved. And a “big driver” of the rally remains the retail investors in China that have excess savings, he added.

Those small investors are sitting on a $23 trillion cash pile, stoking hopes that they will fuel the next leg of the market’s blistering advance.

Separately, Goldman is hiring in India, with a focus on the new Mumbai office as well as Hyderabad and Bangalore, Sneader said. The Hong Kong office’s hiring drive comes amid a strong pipeline of deals, he said.