Goldman Sachs says China is not “non-negotiable”

Despite the backdrop of increasingly challenging investments, the Chinese stock market has pockets of opportunity, says Timothy Mo of Goldman Sachs.

“Of course, China is facing a lot of challenges right now – but we’re going to back down strongly on the clear statement that China is ‘irreplaceable’,” said Moe, Asia-Pacific equity strategist and co-head of Asia Macro Research at Banking Giant, on Friday. Squawk Box Asia “says.

“It’s very dominant and really misses a lot of the specifics needed to invest in China,” he said.

That narrative doesn’t necessarily spread across the entire Chinese stock market, Moe said, adding that in some cases the policy has acted as a tailwind for some sectors.

He cites examples of “hard technology fields” such as semiconductors, where Beijing has clearly indicated that it wants to be self-sufficient.

In March, China’s largest and most important chipmaker Semiconductor Manufacturing International Corporation announced that it was building a $ 2.35 billion factory in Shenzhen – a major technology hub in the country.

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Other sectors that have benefited from the policy include new energy space that was “supported” in Beijing’s 14th Five-Year Plan, Mo said. Last year, Chinese President Xi Jinping announced plans to reduce the country’s carbon emissions by 2030, with the goal of achieving carbon neutrality by 2060.

“If you look at those parts of the market, they’ve done very well this year,” Moe said, although he acknowledged that the investment climate in China has “become more challenging.”

Concerns over Beijing’s ongoing regulatory crackdown have weighed heavily on Chinese stocks this year.

The CSI 300 index, which tracks the largest mainland-listed stocks, was down about 5% as of Friday’s close. In comparison, other major regional indices such as Japan’s Nikkei 225 rose about 5% over the same period.

On Wall Street, the Dow Jones Industrial Average and the S&P 500 have traveled to record highs on the back of strong corporate earnings in recent days.

– CNBC’s Yen Ni Lee contributed to this report.

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