Goldman Backs China Bulls With Its 50 ‘Common Prosperity’ Stocks

(Bloomberg) -- Goldman Sachs Group Inc. has spotlighted 50 China stocks that stand to benefit from President Xi Jinping’s “common prosperity” campaign, bolstering the view that Beijing’s regulatory shakeup is also bringing opportunities.

Companies connected to themes such as manufacturing upgrading, green energy, state-owned enterprise reforms and mass consumption can benefit from Xi’s ambitions, strategists including Kinger Lau said in note dated Monday. 

While Chinese stocks have taken a battering this year since peaking in February, prices are ticking back up this month amid a reassessment of valuations and the longer-term impact of policy shifts. HSBC Holdings Plc analysts upgraded their call on Chinese stocks to overweight this week, adding to upbeat assessments of the outlook from BlackRock Inc., UBS Group AG and Fidelity International.

READ: What ‘Common Prosperity’ Means and Why Xi Wants It: QuickTake

Goldman’s model portfolio includes communication-equipment maker Xiaomi Corp., LONGi Green Energy Technology Co. and sportswear producer Li Ning Co. The 50 companies have a combined market capitalization of about $1 trillion, and could grow profits at a compound annual growth rate of 27% in the next two years, the strategists said.  

“We believe ‘Common Prosperity’ is more than just about redistribution but an overarching development plan led by the Communist Party that could reshape China’s future growth trajectory in the years to come,” they said. 

Still, luxury consumption, “soft” tech with high data intensity, and socially-important sectors may see continuing regulation headwinds, according to Goldman.

HSBC said “the baby is being thrown out with the bathwater” by pessimists on China. It sees value in real estate, industrials, healthcare and some banks. 

UBS sees tighter regulation as being priced in already and BlackRock thinks there is “room for tactical upside.”

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