(Bloomberg) -- Goldman Sachs Group Inc. turned more bullish on stocks tied to China and South Korea, saying this year’s Asian laggards will outperform in 2023 as the mainland reopens after Covid-19 restrictions and the global backdrop improves.
“Regional equity leadership may shift north after Asean and India strength in 2022 as China markets rebound and Korea anticipates recovery,” strategists including Timothy Moe wrote in a note. A challenging global economic backdrop for interest rates, growth and the dollar may also improve in the second quarter, they added.
The US investment bank upgraded Hong Kong to marketweight from underweight and raised South Korea to overweight from marketweight in its Asia allocation. It remained overweight on the MSCI China Index.
Moe and his team expect a 16% return for the MSCI China benchmark and the CSI 300 Index next year. Separately, they downgraded Indonesia to marketweight from overweight, and Thailand and Malaysia to underweight.
Goldman slashed the 12-month target for the MSCI Asia Pacific Excluding Japan Index to 515 from 585 on Sept. 30. The gauge has since risen by about 11%, taking it to 4.3% short of the expected level as of yesterday’s close.