Goldman Sachs just added — and removed — stocks on its 'conviction list' of top Asian picks

Published Tue, Mar 12 20247:21 PM EDT

Amala Balakrishner @in/amala-balakrishner @_amalabk

Goldman Sachs has refreshed its "conviction list" of top picks in Asia Pacific for March, adding some key stocks and removing others. The bank struck an optimistic tone on the region, noting that its markets had recovered their January losses and were now trading flat year to date. "Wide market/sector/factor performance disparity and less large cap bias than the U.S. reinforce the theme of intra-regional opportunity," the investment bank's analysts wrote in a Mar. 3 note. "Earnings will be the main driver of share performance, given that valuations that are broadly in line with macro conditions." Key trading themes on their radar include global exposure, earnings delivery, a focus on value, and leveraging opportunities in artificial intelligence. Here are two of the latest additions to Goldman Sachs' conviction list: Xero Goldman analyst Kane Hannan said he was positive on the outlook for New Zealand-headquartered accounting software company Xero . The company's "pivot to profitable growth and corresponding earnings ramp, [provides] an attractive entry point into a global growth story," he said, adding that Xero is a preferred large-cap technology name in the Australia and New Zealand region. Looking ahead, Hannan believes that the company, with its refreshed management team, "is very well-placed to take advantage of the digitization of SMBs [small and mid-sized businesses] globally." He said one challenge faced by the company was its ability to compete with Intuit's Quickbooks in the U.S. and with Sage in the U.K. While the "market opportunity is large enough for multiple successful players," he expects the debate to persist over time, he added. However, Hannan remains convinced that "Xero, through its cloud-first approach (and no legacy desktop) is well positioned to compete, and through its management refresh, increased product cadence, focus on an open ecosystem & partnerships, is well positioned to compete in these large and attractive markets." Goldman Sachs has a price target of $152 on the stock, giving it potential upside of around 12%. Hyundai Motor Another addition to Goldman's conviction list is South Korean automobile manufacturer Hyundai Motor . Analyst Kota Yuzawa sees the company gaining from a "fundamental improvement in U.S. market share gains, diversified powertrain strategy, solid EV margin, and improving shareholder returns [that] aren't fully appreciated by the market." Yuzawa said risks such as weakening end demand and an EV slowdown were "largely priced in," and he expects the market to re-evaluate the company's fundamentals, "with additional potential upside from corporate governance improvements." Looking ahead, the analyst expects Hyundai's earnings to decline in 2024, but says "the valuations are more than reflecting this slowdown whilst not recognizing Hyundai's structural improvement in U.S. market share and multi-powertrain strategy." Goldman gives the stock a price target of 290,000 Korean Won ($221.36), implying potential upside of around 20%. Meanwhile, the Wall Street bank removed Singapore-headquartered bank OCBC and Japanese conglomerate Sony from its conviction list as it no longer deems them "a top investment idea." — CNBC's Michael Bloom contributed to this report.