Goldman Sachs Picks a Bad Day to Advise Selling Great Wall

(Bloomberg) -- A Chinese automaker rose by the most it’s allowed just as Goldman Sachs Group Inc. told investors to sell the shares.

Great Wall Motor Co. surged by the 10 percent daily limit in Shanghai, making it the top performer on the CSI 300 Index, after Goldman resumed its coverage of the stock with a sell rating. It rallied 9 percent in Hong Kong. The gain by automakers came as an official said Beijing plans to roll out measures to help boost purchases of cars in China.

Goldman’s thesis is straightforward: the country’s passenger vehicle market is heading for a virtual dark age as the economy slows and the end of tax breaks curbs demand. Even by 2021, sales volumes will still be lower than in 2017, analysts including Fei Fang wrote in note dated Tuesday. Great Wall’s yuan-denominated shares trade at a premium to their Hong Kong-listed equivalent, which Goldman says will limit gains even if the auto market turns around.

Great Wall’s A shares are now 52 percent more expensive than their H shares, and 61 percent above Goldman’s new price target. Short interest on Great Wall’s H shares was about 17 percent of shares outstanding as of Monday, with traders needing more than 20 days to cover their positions, according to IHS Markit Ltd. data. Goldman has a neutral rating on the Hong Kong-traded stock.

To contact the reporter on this story: Richard Frost in Hong Kong at rfrost4@bloomberg.net

To contact the editors responsible for this story: Sarah Wells at smcdonald23@bloomberg.net, Sofia Horta e Costa, David Watkins

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