Goldman Sachs forecasts continued gains for Chinese equities through 2026, driven primarily by earnings growth supported by artificial intelligence adoption, export strength and policy measures. While returns are expected to moderate compared to the strong performance of 2025, the bank remains positive on the market outlook.
In their latest report, strategists led by Liu Jingjin project the MSCI China Index to rise by a further 20% from the end of 2025 to the end of 2026. Meanwhile, the CSI 300 Index is forecast to gain approximately 12%, reaching around 5,200 points. Both indices have already shown strong starts to 2026, appreciating by more than 3% since the first trading day and outperforming the S&P 500.
Goldman Sachs highlights that 2026’s returns will be mainly earnings-driven, signalling a shift away from the valuation-led rebounds seen previously. Corporate profit growth is expected to be supported by key factors including increased AI deployment, China’s “going global” export strategy, and government efforts to reduce harmful over-competition across industries.
The bank identifies five significant capital flow channels that could underpin equity markets in 2026:
– Record Southbound inflows potentially reaching USD 200 billion
– Domestic asset reallocation possibly directing RMB 3 trillion into stocks
– Dividends and buybacks approaching RMB 4 trillion
– A shift among global active funds from underweight to overweight China exposure
– IPO financing exceeding USD 100 billion, indicating renewed market vitality
On the macroeconomic front, Goldman economists have raised their 2026 GDP growth forecast above consensus levels, citing resilient exports and greater export diversification. Although consumption and property investment remain sluggish, their negative impact on growth is seen as gradually diminishing. Policy conditions also appear supportive, with the launch of China’s 15th Five-Year Plan expected to sustain a pro-market environment through monetary easing, fiscal stimulus and improved treatment of private enterprises.
Valuations have normalised following previous stress, with forward price-to-earnings ratios at roughly 12.4 times for MSCI China and 14.5 times for the CSI 300 — broadly in line with long-term averages.
Sector-wise, Goldman is most bullish on Technology, Media and Telecom (TMT), forecasting around 20% earnings growth fuelled by AI-related revenues and capital expenditure. The bank maintains overweight positions in technology hardware, media and entertainment, internet retail, materials and insurance sectors.
Goldman also highlights a core group of ten leading companies — dubbed the “Prominent 10” or “China champions” — which together make up about 40% of MSCI China’s weight. This group includes Tencent, Alibaba, CATL, Xiaomi, BYD, Meituan, NetEase, Midea, Hengrui Pharma and Trip.com, and is expected to deliver mid-teens earnings growth in 2026.
Risks to this outlook include a potential global recession, ongoing geopolitical tensions, and the possibility of an AI-related valuation correction. However, Goldman argues that China’s relatively lower valuations and broad AI exposure could provide some insulation against these risks.
Overall, forex traders looking at Chinese equities should monitor profit momentum, sector-specific developments in AI, capital flow trends, and evolving policy support as key drivers for yuan-related investment opportunities in 2026.
Original Source: Eamonn Sheridan of investinglive.com
