Goldman Sachs wealth-management executive warns against buying Chinese stocks, citing tepid growth, opaque policy

The bearish call reflects jitters among overseas investors about the outlook for the mainland China economy
Comments come as both onshore and offshore shares show nascent signs of stabilisation amid state support and the return of foreign inflows

China stock market

Zhang Shidongin Shanghai

Published: 3:30pm, 5 Mar 2024

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A top executive with Goldman Sachs Wealth Management has warned against investing in Chinese stocks, hinting at ongoing jitters among foreign investors even as both onshore and offshore shares show nascent signs of stabilisation amid state support and growing foreign inflows.

Sharmin Mossavar-Rahmani, the chief investment officer of Goldman’s wealth-management business, said in an interview with Bloomberg News that she would not advise high-net-worth clients to buy Chinese stocks, citing moderation in growth, opaque policymaking and doubts over the authenticity of economic data as reasons.

The comments come as China’s top policymakers are trying to put an end to a three-year stock market decline and seeking the return of overseas traders. In February, Beijing put a new boss known for his tough stance on market malfeasance in charge of the securities regulator, penalised two hedge funds for disruptive high-frequency trading and imposed restrictions on short selling.

Foreign investors bought a net 60.7 billion yuan (US$8.4 billion) of onshore shares via the Stock Connect programme with the Hong Kong exchange in February, snapping an unprecedented run of six months of outflows valued at 201 billion yuan.

Sharmin Mossavar-Rahmani speaks at the Forbes Iconoclast Summit at New York Historical Society on November 03, 2022 in New York City. Photo: AFP

The CSI 300 Index has rebounded 12 per cent after hitting its lowest level in five years in early February, and the Hang Seng Index has risen about 4 per cent over the past month.

Mossavar-Rahmani’s bearish call on Chinese stocks reflects jitters among overseas investors about the dire outlook for the mainland China economy, which is struggling with headwinds from a protracted downturn in the property market, weak consumer spending and demographic change.

More policy easing, demand-side stimulus measures, plans to boost confidence in the private sector and an improvement in China-US ties will be needed to sustain the rally sparked by the state’s tactics thus far, the US bank said in a research note over the weekend.

Goldman offered no comment on Mossavar-Rahmani’s view.

Goldman’s investment bank is currently overweight on A-shares, is marketweight on Hong Kong-listed mainland Chinese stocks, and expects a 10 per cent return from the MSCI China and CSI 300 indices on a 12-month basis, according to a note.

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The bank is working to expand its presence in China’s financial industry after converting a brokerage partly owned by a local partner into a wholly-owned unit in June last year.

At the same time, China has been tightening its grip on analyst comments issued by both domestic and overseas investment banks that may sway the market and influence the nation’s 220 million individual investors.

The bearish call by Mossavar-Rahmani echoes a stir in 2022 when JPMorgan Chase labelled Chinese tech stocks including Alibaba Group Holding, Tencent Holdings and Meituan as “uninvestable” in a report. The bank later said that the word was inserted in error.

JPMorgan was removed from a list of key underwriters for the Hong Kong initial public offer by Kingsoft Cloud Holdings after it cut the price target on the company’s US-listed shares by half as part of a flurry of downgrades following its bearish call.