Goldman Sachs and Morgan Stanley encourage investors to buy Chinese stocks with both firms similarly optimistic about more relaxed policies in the Asian powerhouse as well as declining global trade tensions by 2019.
Goldman suggested buying "beaten-up" Chinese A-shares as relaxing policies in China will pave the way to upbeat markets in the first or second quarter of 2019, according to Bloomberg.
Morgan Stanley, meanwhile, encouraged buying Chinese old-economy stocks in the early quarter of 2019 and then making a switch buying new-economy stocks thereafter. The firm categorizes material producers stocks as old-economy while consumer and technology stocks as new-economy, South China Morning Post noted.
Goldman Sachs Group Inc. said it expects Chinese stocks to outperform in the Asian market as the powerhouse recognized the significance of easing policies in allowing more market growth. Kinger Lau, a strategist for Goldman, noted that China has undergone challenges on a global scale that the Asian powerhouse has now been more supportive and understanding with implementing market-related policies.
Goldman and Morgan Stanley were also similarly optimistic about Hong Kong stocks.
Morgan Stanley said Hong Kong's stocks will rise at approximately 8 percent in 2019, driven primarily by the uptick in buying from the mainland's traders.
Goldman, meanwhile, projected that the MSCI Hong Kong Index will potentially rise at about 5.7 percent next year from the gauge's closing on Monday. Southbound inflows will probably reach $20 billion in 2019 compared to $11 billion this year, Goldman added.
Morgan Stanley also predicted that China's onshore stocks are on its way to gaining 10 percent in 2019 provided that trade war between the world's two largest economies continue to subside. The US firm also bet on the possibility that Chinese companies trading in Hong Kong would be able to close the valuation gap with their counterparts from other emerging markets in 2019. Chinese stocks, overall, are expected to trade at 11 times the approximated 12-month earnings compared with 10.3 times the rate at which they are currently trading.
Meanwhile, it appears that both US firms were correct on betting on easing China-US trade war.
White House economic advisor Larry Kudlow told reporters Tuesday that there could be a "breakthrough" achievement when Chinese President Xi Jinping and US President Donald Trump meet at the sidelines of the of the G20 meeting in Buenos Aires.
Kudlow said the US president is seeing a "good possibility" that the nations will finally see eye to eye and reach a concession when they meet on Dec. 1 in Argentina.