Goldman Sachs Sees Chinese Earnings Strength Spreading Beyond AI

According to CNBC, Goldman Sachs said Chinese corporate earnings are rising at a strong pace and identified sectors that may still offer untapped returns, with nearly half of MSCI China index constituents beating estimates in the second quarter. Goldman’s portfolio strategy research team said earnings tracked by the firm grew 24% in the second quarter from a year earlier, the fastest quarterly pace in five years and up from 6% in the first quarter, with IT and healthcare stocks leading the gains. The analysts said artificial intelligence-related names drove much of the improvement, but earnings call transcripts from more than 1,500 Chinese companies showed management and investors are also discussing downstream and application areas such as data center operators, AI models, autos and healthcare. Goldman screened its buy-rated coverage for Chinese companies with expected annual earnings growth above 15% through 2027 and a median 7% increase in earnings per share estimates over the past month. Healthcare stocks made up one-third of the 12 names on the final list, including Innovent Biologics, BeOne Medicines, CSPC and Hansoh Pharma. Goldman expects MSCI China earnings to rise 8% this year, below the broader consensus forecast of 17%.