Goldman Sachs Just Gave China A Big Upgrade

china train

Goldman Sachs upgraded China to overweight in a bullish note released today.

Analyst Helen Zhu points to diminishing inflation pressure as a sign that economic tightening is coming to an end. Beijing will also seek to boost growth that has declined faster than expected.

Looser policy typically leads to a bull market. Goldman forecasts 28% gains in the Hang Seng by year-end.

But there are risks, including an oil spike: “While we think the macro, valuation and positioning context warrants a positive market stance, the coast is not completely clear. The domestic macro cycle has not yet turned, and global risks, such as MENA political unrest and a potential oil price spike, abound. Our timing may be early, and the market’s relative performance could be better than its absolute returns in the near term.

[slideshow]
[slide
permalink=”loose-economic-policy-typically-leads-to-a-bull-market-1″
title=”Loose economic policy typically leads to a bull market”
content=””
image=”http://static.businessinsider.com/image/4d948f6b4bd7c84e6b090000″
caption=””
credit=””
credit_href=””
]
[slide
permalink=”china-has-had-the-most-favorable-2011-earnings-revisions-of-any-regional-market-in-the-past-month-2″
title=””China has had the most favourable 2011 earnings revisions of any regional market in the past month””
content=””
image=”http://static.businessinsider.com/image/4d94830c4bd7c87869010000″
caption=””
credit=””
credit_href=””
]
[slide
permalink=”china-appears-to-be-pricing-in-an-undemanding-long-term-growth-expectations-both-versus-history-and-peers-3″
title=””China appears to be pricing in an undemanding long-term growth expectations, both versus history and peers””
content=””
image=”http://static.businessinsider.com/image/4d9483c54bd7c82769300000″
caption=””
credit=””
credit_href=””
]
[slide
permalink=”risk-in-our-risk-case-primarily-shocks-to-global-growth-via-oil-or-some-other-macro-channel-we-would-argue-that-china-would-decline-but-that-lower-growth-would-obviously-diminish-inflation-concerns-4″
title=”RISK: “In our risk case, primarily shocks to global growth via oil or some other macro channel, we would argue that China would decline, but that lower growth would obviously diminish inflation concerns””
content=””
image=”http://static.businessinsider.com/image/4d94854f4bd7c88069130000″
caption=””
credit=””
credit_href=””
]
[slide
permalink=”goldman-picks-banks-and-property-as-the-best-sectors-for-2011-5″
title=”Goldman picks banks and property as the best sectors for 2011″
content=””
image=”http://static.businessinsider.com/image/4d9486cbcadcbbb2641a0000″
caption=””
credit=””
credit_href=””
]
[slide
permalink=”read-more-about-the-risk-scenario-6″
title=”Read more about the risk scenario…”
content=”Citi’s 8 biggest risks for the world economy >
image=”http://static.businessinsider.com/image/4d07ed4ccadcbb6042040000″
caption=””
credit=””
credit_href=””
]
[/slideshow]