China stocks could surge 20-40% on untapped reform upside

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China stocks could surge 20-40% on untapped reform upside - Goldman Sachs

Since 2021, China stocks have been on a downward trend, prompting the government to implement a series of measures aimed at rejuvenating the market.

Furthermore, the real estate sector, a major component of the GDP, continues to struggle, marked by significant price declines and defaults by major developers, further shaking confidence in China stocks. In the latest effort to spur market recovery, China's state fund Central Huijin Investment bought blue-chip stocks worth approximately $41 billion during the first quarter, as indicated by ETF quarterly reports.

Analysts at Goldman Sachs identified three main areas where they anticipate policy actions based on recent directives, including strengthening capital market supervision and governance; efforts to increase the quality of listed companies, which could involve raising the thresholds for initial public offerings ; implementing more rigorous delisting mechanisms, and improving shareholder returns.

In light of, improvements in shareholder returns, corporate governance standards, and institutional investor ownership, Goldman’s analysts project significant potential upside for A-shares.

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