As Covid cases in mainland China drop, Goldman Sachs analysts say they're "seeing light at the end of the tunnel." Here are some of the stocks they say are poised to make the biggest comebacks if business activity returns to normal. The investment bank's measure of the impact of lockdowns in China fell by 11 points in the last two weeks after reaching a two-year high of 42 in late March and early April. That measure — called the "Effective Lockdown Index" — could fall by another 20 points to a print of 10 by the end of the year, Goldman's economists predict, assuming that regular virus testing becomes a successful way of preventing large-scale lockdowns. Many Chinese cities, including Beijing, have started requiring that people have virus test results from the last day or two in order to enter supermarkets or public areas. Nearly two months after Shanghai's lockdown began in earnest, the government announced this week plans to resume "normal" business and life by mid-June. "We'd focus on select manufacturing-related names to tactically position for the recovery trade," the Goldman analysts said in a May 16 report. They expect government policy will prioritize supply chains, which means manufacturing stocks will likely recover before consumer ones. Of the 40 stocks Goldman picked, the following are the three names that have been most affected by China's Covid controls, according to the bank's lockdown index — and could see the greatest benefit as restrictions ease. GoodWe Technologies GoodWe Technologies manufactures and sells equipment for converting and storing solar power for residential and commercial use. The company's website lists offices around the world, including in Australia, Germany and the United States. For 2021, the company reported a 1.69% increase in net profit attributable to shareholders, ex-items, of 244.7 million yuan ($36 million). Operating income surged by 68.53% to 2.68 billion yuan. GoodWe is based in Suzhou, a mid-sized Chinese city half an hour away from Shanghai by high-speed train. Suzhou began to tighten Covid restrictions on business activity in mid-February. Of Goldman's reopening stock plays, GoodWe was the most negatively correlated with Goldman's Effective Lockdown Index, at 45%. VeriSilicon Microelectronics VeriSilicon Microelectronics was the second-most negatively correlated stock with Goldman's lockdown index, at 44%. The Shanghai-based company sells design and licensing for semiconductors, with research and development centers in China and the United States, according to its website For 2021, VeriSilicon reported a net loss attributable to shareholders, ex-items, of 46.8 million yuan — roughly half the 106.6 million yuan loss recorded in 2020. Operating income rose by 42% to 2.14 billion yuan last year. Anhui Truchum Advanced Materials & Technology Anhui Truchum Advanced Materials & Technology was the third-most negatively correlated stock with Goldman's lockdown index, at 41%. The company is based in Wuhu, Anhui province, a four-hour drive from Shanghai. Truchum manufactures and designs copper products used in cars and electrical appliances, among many others, according to its website. Truchum reported for 2021 net profit attributable to shareholders, ex-items, of 384.2 million yuan, up 70.14% from a year ago. Operating income rose by 62.57% to 37.35 billion yuan. — CNBC's Michael Bloom contributed to this report.
Industrial production unexpectedly fell in April, as Covid controls halted or limited the ability of factories to operate. Pictured here on May 12 is a worker in washing machine production line at a Whirlpool (China) factory in Hefei, Anhui province.
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As Covid cases in mainland China drop, Goldman Sachs analysts say they're "seeing light at the end of the tunnel." Here are some of the stocks they say are poised to make the biggest comebacks if business activity returns to normal.