According to a report from Goldman Sachs, nearly half of the constituents in the MSCI China index exceeded earnings estimates in the second quarter, with overall earnings growth reaching 24%, the highest in five years. This growth was largely driven by artificial intelligence-related companies, prompting investors to seek opportunities beyond the crowded AI Hard Tech sector.
The report indicates that discussions among management and investors are shifting towards downstream sectors such as data centers, AI applications, and healthcare. Goldman Sachs identified Chinese companies with expected earnings growth exceeding 15% annually through 2027, focusing on those with upward revisions in earnings per share estimates.
Notably, healthcare stocks emerged prominently, with companies like Innovent Biologics and BeOne Medicines expected to see their earnings more than double in the coming year. Other companies like CSPC and Hansoh Pharma are also projected to experience significant growth.
Goldman Sachs anticipates overall earnings for MSCI China to grow by 8% this year, which is more conservative than the broader consensus of 17%, indicating a selective approach to investment in the Chinese market