Goldman names 11 stocks that could rally on China's 'common prosperity' drive

Published Thu, Oct 28 202110:49 PM EDT

Analysts at Goldman Sachs have named a slew of stocks that they believe have exposure to China's "common prosperity" drive. The stocks are insulated from regulation risk, have limited exposure to the housing market, and are sensitive to macro policy easing, the investment bank said in a note on Oct. 25. CNBC spotlights 11 of the bank's stock picks that are listed in the U.S. or Hong Kong. President Xi Jinping's remarks on "common prosperity" in August came against the backdrop of a sweeping regulatory crackdown that has ensnared a myriad of sectors from technology to property to private education, roiling the stock market and sending it into a tailspin. The MSCI China index is down 12% this year, while the MSCI World Index is up nearly 18%. While policy specifics have been scant, Goldman believes that Xi's clarion call represents "a growth reorientation where policy support could pivot towards industries that carry long-term strategic value to China." This includes the "semiconductor, green or renewable energy, and sports [sectors]," it said. Despite a slide this year for Chinese equities, opportunities remain for investors to cash in, with Goldman noting that "investing aligned with long-term policy goals has been historically rewarding in China." The Wall Street firm identified "mass but unique consumption," "hard" technology and manufacturing upgrading, green or renewable energy, and state-owned enterprise reformers as the "structural trends that could reshape the alpha-generating universe for Chinese stocks in a new regulation normal." Nasdaq-listed Trip.com is the only U.S. listed name on the Goldman list. The investment bank expects the company to deliver gradual margin expansion over the next few years, driven by international business recovery, analysts led by Ronald Keung said in a Sept. 29 report. The online travel platform provider is buy-rated by Goldman, with a 12-month target price of $43. The stock closed at around $29 on Oct. 27. The list also includes Chinese smartphone giant Xiaomi , which the bank likes for the continuous execution of its premiumization strategy and expansion of its market share, analyst Piyush Mubayi and his team said in an Oct. 21 note. Remarks from the company at a recent investor day also reaffirmed the analysts' view of the company's ability to grow its leading global smartphone market share, while its "Smartphone x AIoT" strategy will drive revenue and profitability growth from internet of things/lifestyle products and internet services, the analysts said. Goldman puts the company's price target at 29.5 Hong Kong dollars ($3.79) — an implied 34% upside to the stock's closing price at around 22 Hong Kong dollars on Oct. 28. The investment bank has a buy rating on the stock. Goldman also chose sportswear retailer Li-Ning . In an Oct. 25 note, analyst Michelle Cheng and her team noted that the company had delivered a "solid performance" in the third financial quarter, with total retail sales data outperforming the Street's estimates. The bank believes the company will continue to benefit from a solid profit growth trend, driven by healthy brand momentum, efficiency enhancement, and solid industry structural growth upside. The bank has a buy rating on the company, with a price target of 115 Hong Kong dollars. The stock closed at around 87.4 Hong Kong dollars on Oct. 28 — a potential upside of 32%. The bank's other stock picks in the U.S. and Hong Kong are sports equipment retailer ANTA Sports , pharmaceutical firms CSPC Pharma and Hansoh Pharma, solar glass firm Xinyi Solar, software company Chinasoft International , chip foundry Hua Hong Semiconductor , dairy products manufacturer China Feihe and online travel agency Tongcheng-Elong .

Crowds walk below neon signs on Nanjing Road, which is in the main shopping district of Shanghai, China.

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Analysts at Goldman Sachs have named a slew of stocks that they believe have exposure to China's "common prosperity" drive.