GS: China’s lesson forces a rethink of emerging markets‎

The head of global currency, interest rates and emerging markets strategy at Goldman Sachs Group said he learned two key lessons from one of the biggest – and most common – bad calls of 2023: betting on China’s post-pandemic reopening boom.

At the beginning of the year, Goldman Sachs was among the chorus of Wall Street banks that pinned their hopes for a bright 2023 partly on a recovery in China, where strategists expected a 15% rise in the Chinese stock market. It was expected that the recovery of the second largest economy in the world would be the wave that lifts all boats, helping emerging markets around the world achieve a remarkable year.

The US bank official adds that China is no longer linked to emerging markets, as the proactive monetary policy has made emerging markets more flexible and able to withstand, while this has not been achieved in China.

Last August, Goldman Sachs expected Chinese stocks to settle in a trading range lower than previously expected, until Beijing adopts stronger policies to confront the risks of spreading the contagion of the real estate sector decline. The Wall Street investment bank lowered its earnings per share estimate for the MSCI China Index for the full year, from 14% to 11%, and lowered the index’s 12-month target from 70 to %67, according to strategic analysts.