New A-share piece out from Goldman Sachs:
"A-share market view
updates: partly cloudy to fair
Property tightening brings positive changes
Since publishing our A-share Outlook Report on Jan. 17 (China
Portfolio Strategy: A-share outlook: growth amid challenges) we have had extensive discussions with domestic and overseas investors. Now we update and reiterate our views in the context of recent developments.
Market uncertainty is now undoubtedly lower than before the recent third round of property tightening. We believe the overhang relating to the specifics of these property tightening policies has now largely dissipated, although we expect consumer price risk to continue to limit substantial near-term upside. Meanwhile, we expect the tightening policies will also help to ease inflation pressure in 2H11. The CSI300 rebounded for two
consecutive days after the policy announcement, indicating positive market reaction to the changes.
Maintain end-Q1 CSI300 target of 3,200 & sector preferences
The announcement of property tightening has partly alleviated market uncertainties. High short-term interest rates, which have caused widespread market liquidity concerns in the past several weeks, are likely to fall after the Chinese New Year. Together with positive annual reports, we expect a volatile but upward market trend for the rest of Q1. We reiterate our end-of-Q1 target of 3,200 end-Q2 index target of 3,500 and year end target of 4,000 and we continue to favor auto & parts, retailers, capital goods, container shipping, materials.
Our views on several frequently asked questions
In the past few weeks, we have had dialog with investors in Beijing, Shanghai and Hong Kong. In this report, we outline our views on several important areas of investor concern: 1) How to assess the impact of current tight liquidity; 2) Why we prefer auto & parts; 3) How to determine the impact of online shopping on retailers 4) What constitutes a good entry point for small/mid-cap growth stocks 5) Whether FAI-related sectors will
be impacted by a possible slowdown in property investment.
