MSCI's China index should reap returns of 11 percent in 2019, investment bank Goldman Sachs said on Monday, though it warned that the world's second largest economy faced a challenging and uncertain macro backdrop. "Our economists look for 6.2 percent GDP growth in 2019, led mainly by investment amid slowing exports and consumption, near-term balance of trade risks for dollar/yuan moving to 7.1 in early 2019," Kinger Lau wrote in a note to clients.
A mix of growth/valuation, stabilizing equity demand and potential asset re-allocation flows from property could bring a bounce late in the first quarter, he said. "We like China A shares given its favorable risk/reward and inclusion-provoked inflows," he said, referring to the gradual inclusion of A-shares in global emerging market indexes. Goldman is overweight on both China A and MSCI China, he added. MSCI's China index has fallen more than 16 percent since the start of the year.