Goldman: FOMO can push up Chinese stocks by 50%

China A shares could be poised for big gains as “fear of missing out” takes hold, according to Goldman Sachs Group Inc. The Shanghai Shenzhen CSI 300 Index of A-share stocks “would give approximately 50 percent and 15 percent potential upside from current levels if retail optimism were to return to its peak in 2015 and 2018 respectively,” Goldman strategists led by Kinger Lau wrote in a report Sunday. They cite improving risk sentiment and lack of investor participation in the earlier rally as fuel for further gains.

The CSI 300 rose 28 percent from the end of 2018 through March 6, becoming the world’s best trade in February, before retreating a total of 5 percent on Thursday and Friday as investors worried that Beijing wanted the surge to slow down. The index and other major China stock gauges are still beating most global equity benchmarks.

Many investors haven’t fully participated in the rally, Goldman said. Local institutional investors had relatively high levels of cash to start the year, equity-focused mutual funds have been lagging the market, global active mandates are extremely underweight the MSCI China Index and emerging-market and Asia ex-Japan funds are behind the new benchmark weight on China A shares. “Benchmark and performance pressures have created a sense of ‘fear of missing out’ among domestic investors,” the Goldman strategists wrote. “Upside optionality on retail optimism” is “attractively priced in the current valuations.”

Investor FOMO Could Lift China Stocks 50%, Goldman Says, Bloomberg, Mar 11