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Goldman's must-own Chinese Internet stocks

Tencent Holdings sign
Brent Lewin | Bloomberg | Getty Images
Tencent Holdings sign

The old economy in China may be faltering with the industrial and manufacturing sectors slowing, but Goldman Sachs believes the Asian country's consumers will still boost Internet companies.

Goldman's Piyush Mubayi told why in a note to clients Monday:

"China's major Internet companies look well positioned post five mergers in 2015, a flurry of buybacks and the inclusion of the Chinese ADRs to MXCN. We believe these factors will collectively lead to improved earnings and a crystallization of value at a time where the sector remains in favor."

MSCI, a provider of global equity indexes, announced mid-November it will include 14 U.S.-listed Chinese Internet companies in the MSCI China index (MXCN) starting on Tuesday. The MCXN is used as a benchmark for $1.5 to $1.7 trillion worth of investment funds, according to Goldman Sachs.

Due to the inclusion in the China index, Mubayi expects the U.S.-listed Chinese Internet company ADRs to sport higher valuation multiples and have lower-price volatility in the future, as funds increase their allocation to the names.

Here are the Chinese Internet companies Goldman recommends and the price target changes...


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