Goldman Sachs has downgraded its rating on H shares, which are stocks traded in Hong Kong, to market-weight from overweight, while maintaining an overweight rating on A shares, which are traded on the mainland. This decision is driven by the bank's focus on artificial intelligence hardware, as most of China's AI semiconductor companies are listed on the mainland.
Goldman Sachs has also raised its 12-month target for the CSI 300 index to 5,500 from 5,300, suggesting a potential upside of nearly 12% from the previous close. In contrast, the MSCI China index, which is heavily weighted towards H shares, has been downgraded to market-weight in a regional context, despite still expecting 11% potential gains over the next year.
The performance disparity is notable, with the Hang Seng Index up about 1.5% year-to-date, while the CSI 300 has risen over 6%. The Hang Seng Tech index has declined more than 5.5%, whereas the ChiNext index has surged over 25%. This divergence highlights the Chinese government's focus on hardware development in AI, which has contributed to significant gains in the AI equity market.
Goldman Sachs' Kinger Lau noted that while hard tech stocks have shown strong growth, larger internet companies are struggling. Upcoming IPOs for Chinese chips and humanoid robots are expected to be listed on the mainland, further emphasizing the shift away from Hong Kong listings