China Stock Index Forecasts Raised by Goldman Sachs

(Bloomberg) -- Chinese stock index forecasts were raised for exchanges in the mainland and Hong Kong as stimulus measures revive the economy, Goldman Sachs Group Inc. said.China’s CSI 300 Index will rise to 2,600 by year-end, up from an earlier forecast of 1,980, Goldman Sachs said in a note today. The gauge fell 1.1 percent to 2,544.86 at 10:45 a.m. The Hang Seng China Enterprises Index prediction was raised to 10,300 from 8,900 and the shares were upgraded to “overweight.” The measure fell 2.4 percent to 8,770.97. Goldman Sachs last week increased its estimate for China’s economic growth in 2009 to 8.3 percent from 6 percent. The Hang Seng China index, a measure of China companies traded in Hong Kong, has risen 14 percent this year, compared to a 4 percent decline in the MSCI World Index. The CSI 300, which tracks stocks traded on the two mainland exchanges in Shanghai and Shenzhen, has gained 40 percent.

China unveiled a 4-trillion yuan ($585 billion) stimulus package in November and gave out subsidies to spur purchases of household appliances and vehicles. The central bank cut interest rates five times from September to December.

China’s Economy

The world’s third-largest economy should be able to “continue to grow relatively fast,” China’s central bank Governor Zhou Xiaochuan said April 25. Vice Premier Wang Qishan said measures undertaken by the Chinese government to boost the economy have shown results, Sing Tao Daily reported today. The government has a target of 8 percent growth in gross domestic product for 2009.

A resurgent China should assist the recovery of linked economies such as Hong Kong and South Korea, the report said. Corporate earnings are likely to stabilize and improve into 2010, the strategists said.Goldman Sachs Group Inc. April 15 ended its recommendation to be “long” on China’s A shares as the benchmark Shanghai Composite Index was nearing the 2,600 target set when the bank initiated the strategy in December. The shares had gained because of the combination of “aggressive” government stimulus measures and “sequential improvement” in economic data, Goldman Sachs analysts including Jim O’Neill said.