Goldman Sachs Group Inc. anticipates that Chinese stocks will settle within a lower trading range until Beijing implements more robust policy measures to counteract the contagion risk.
The global financial institution has revised its outlook for the MSCI China Index, lowering its full-year earnings-per-share growth projection to 11% from the earlier 14%. Also, the 12-month index target has been adjusted downward to 67 from the previous 70, as revealed in a recent report authored by strategists including Kinger Lau.
Despite the reduced projection, this new target still implies a potential 13% gain from the index’s Friday closing value.
The strategists at Goldman Sachs pointed out, “The initial market optimism that followed decisions made by the Communist Party’s top decision-making body in July was short-lived. The real estate market’s ongoing challenges and the subsequent threat it poses to both the real and financial sectors are widely acknowledged factors contributing to this market correction.”
This marks the second instance within a span of three months that Goldman Sachs has revised its stance on Chinese equities and also the change in sentiment is reflective of the pervasive pessimism that has taken hold in the nation’s stock market.
Despite these challenges, Chinese shares continue to benefit from attractive valuations and limited investor exposure. However, the potential for growth remains restricted due to persistent liquidity and growth headwinds as outlined by Goldman Sachs strategists.
On Monday, the MSCI China Index witnessed a decline of more than 1%, bringing its total retreat from the peak observed in January to 23%.
In a similar move earlier in June, Goldman Sachs had previously revised its MSCI China target from 80 to 70, citing concerns related to earnings and currency dynamics.
In their most recent report, the strategists recommended focusing on sectors and stocks that offer enhanced earnings visibility and a proven track record of delivering profits. Additionally, they suggested considering investments that stand to benefit from the depreciation of the yuan.
Bearish Sentiment Persists: Investors Lose N112 Billion on NGX
Drastic Decline in FGN Bond Listings Raises Concerns Over Government Borrowing
Data from the Nigerian Exchange Limited (NGX) has shown that the value of listed Federal Government of Nigeria (FGN) Bonds on the exchange experienced a decline of 99.9% in the eight months ending on August 31, 2023.
Plummeting from N1.6 trillion recorded during the corresponding period in 2022 to a mere N148.2 billion.
The stark contrast in FGN Bond listings between the two years has raised eyebrows and prompted experts to delve into the implications of this significant shift.
Analysis of NGX data revealed that the bonds listed this year primarily consisted of the FGN Savings Bond and Sukuk, whereas the previous year featured a combination of both Federal Government Bonds and Savings Bonds.
Among the listings, the FGN Sukuk stood out with the highest recorded value of N130 billion for the period under review.
Analysts have identified several factors contributing to the stark decline in FGN Bond listings.
David Adonri, an analyst and Vice Executive Chairman at HighCap Securities Limited, commented on this development, and said, “The reduction of FGN Bond listing could be an indication that the government borrowed less in the domestic market, and its implication is that it could affect liquidity in the secondary market.”
He continued, “The decline could also be that the FGN Bonds were not listed on the Exchange during the period under review as only the Savings Bonds were captured as well as Sukuk.”
Adonri highlighted concerns about the country’s debt profile, both domestically and internationally, saying, “Both externally and internally, the immediate past government had taken more debt. This is increasing the risk of sovereign default and economic nightmares.” He also noted the adverse effects on the real sector, explaining that “the borrowing has now reached the alarming point of crowding out the productive real sector.”
Tajudeen Olayinka, an Investment Banker and Stockbroker, echoed similar sentiments, saying, “If there was an increase in debt listings in the market, it brings about increased liquidity and trading activities in the market, but the drop in the eight-month period could be largely as a result of higher yields in other competing instruments.”
Olayinka also speculated that “the drop in the FGN Bond listing could also be that there was less borrowing by the government in the primary market so not much to offer for listing in the secondary market.”
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