The continued trade war between the world’s two biggest economies, the United States and China, has proven to be the biggest economic issue in this decade. On top of that, there is still no sign that the trade war is going to be resolved any time soon, and that has made life extremely different for investors all over the world. Investors who used to bet on Chinese stocks and the country’s economy have decided to stay away from the volatile markets. On the other hand, the economic slowdown in the country has now many favors either. In a new development, investment banking behemoths Goldman Sachs and JP Morgan have expressed their reservations about Chinese stocks.
For Goldman Sachs, the primary concern is the trade war, and due to the continuation of the same, it has cut its projections for MSCI China Index earnings per share. On the other hand, JP Morgan has stated that according to the data available with the bank, the stocks in the Chinese markets are currently overbought. The reasons provided by the banks might be different, but both have urged caution when it comes to investing in these stocks. Earlier on this year, Goldman Sachs had projected earnings per share growth to be between 9% and 10%, but now it has decided to cut its projections to a range between 6% and 8%. It goes without saying that it is a significant cut and shows the outlook of one of the world’s biggest investment banks with regards to Chinese stocks.
On the other hand, JP Morgan has stated that hedge funds and assorted institutional investors have made leveraged bets on Chinese stocks. In addition to that, there has been a significant rise in the number of long positions in the Chinese market. In its report, JP Morgan stated, “The Chinese equity market looks currently pretty overbought especially compared to last year.” These are highly uncertain times for investors, and hence, many have started buying gold in order to safeguard their capital. Consequently, the price of gold has gone on an incredible rally for much of the year.