Goldman Sachs: Still bullish on the Chinese stock market, overweight on China (H shares and A shares), Japan, and Singapore.

, Overnight tariffs have been implemented, with the United States imposing a 10% tariff on all imports and imposing different levels of "counter tariffs" on different countries. It has announced a 34% counter-tariff on China. Goldman Sachs Group, Inc. believes that overall, the counter-tariffs imposed by the United States on Asia will be significantly higher than those imposed on other countries and regions. Emerging markets will be more impacted than developed markets, while Canada and Mexico will be less affected. Asian stock markets and emerging market currencies may face significant impacts during the day. Traders have observed clients selling long positions in technology stocks and hedge funds heavily shorting macro products (ETF). S&P 500 futures fell by 3.5%, and the Japanese stock market opened with a 3% decline. Previously, the general expectation for the total increase in tariffs on Chinese exports to the United States was around 60%, but in the past 1-2 months, the sentiment towards tariffs has eased. Therefore, the additional 34% announced this time may still have an impact on sentiment. However, Alec Philips, a US policy economist at Goldman Sachs Group, Inc., also pointed out that the tariffs announced on April 2nd are likely to exceed expectations, but there may be more negotiations later on, and the implementation of tariffs may be lower than announced. Therefore, further developments need to be observed. Regarding the impact on the Asian/Chinese markets that everyone is most concerned about, we mentioned in a previous report that historically, when the S&P retreats by more than 10%, the MXAP stock index also faces a decline. Therefore, the best scenario for seeing inflows of funds into Asian markets is when 1) Asian and EM economic growth is expanding compared to the US, 2) the US dollar is depreciating, 3) US stocks are trading within a range rather than unilaterally declining, prompting investors to seek returns in other markets. Given that the tariffs are higher than expected at the moment, in the short term, concerns about high inflation and economic slowdown in the US may bring about significant market volatility. In the short term, there may be a focus on high dividend/ shareholder return assets, domestic demand, and safe-haven gold assets. Consumer analysts reiterated their positive views on Maotai and BUD APAC. Maotai's 24-year performance is in line with expectations, with a 9% revenue growth outlook for the 25th year, slightly higher than market expectations. Leaf expects a full-year revenue/net profit growth of 8.6%/10.3%, with the stock trading at 21x and a dividend yield of 3.6%. BUD APAC's estimation for recovery in China in 1Q is slow, but it will accelerate in 2Q (from a lower base), with a strong market in South Korea, and the new CEO emphasizing execution and high-end strategy in China. However, I believe that the short-term gains have been considerable, and further increases may require more significant drivers of consumer recovery. March PB Report Released The March PB report has been released, with global fundamentals experiencing more than 2 points of retracement among long-short hedge funds, mainly due to beta losses in a selling environment. Meanwhile, systematic hedge funds benefited from the volatility environment and achieved the best 1Q performance in history, with a 4.4% return in March. Overall fund flows show an accelerated reduction in positions by hedge clients (especially shorting individual stocks), with total/net leverage ratios further declining. From a regional perspective, hedge clients have shown net outflows in North America (shorting), Europe, and Asia (selling/shorting), with North America seeing the largest net outflows since January 2022, and short positions increasing in almost all industries. Emerging markets/China saw significant selling in March, with inflows accumulated at the beginning of the year turning into net outflows. In April, Asia-Pacific equity markets added CHINA RES LAND (01109) and Weichai Power (02338), with a positive outlook on the heavy truck industry. Favorable policies, demand renewal, and electrification have initiated a new upcycle in the industry. Weichai, besides industry beta, also has potential alpha opportunities from its capital spending in Europe (holding 47% of the shares in Germany's Kion Group), which has turned from headwinds to potential opportunities. There has been much discussion in recent days regarding the use of LIDAR in autonomous driving (vs. pure visual solutions). ROBOSENSE (uncovered by the research department) recently announced better-than-expected performance, with analysts predicting a 110% increase in shipments. This is seen as positive for Hesai Group Sponsored ADR, covered by us, as domestic automakers' approval of ADAS LIDAR accelerates, and leading OEMs are aiming for L3 technology by the end of the year. The industry is expected to enter a period of rapid growth, with competition from multiple suppliers likely, but orders will still be concentrated among top companies (ROBOSENSE (02498), Huawei, Hesai (HSAI.US), Velodyne Lidar, vs. other players in the market). Trading Dynamics 04/02 Hong Kong trading desks are 1.2x leaning towards selling. In terms of sectors, clients bought beverages (Chongqing Brewery) and sportswear (BOSIDENG), and financials vs. selling jewelry/gold. The internet sector overall leans towards selling, with clients selling Tencent and buying Kuaishou; Xiaomi sees active two-way trading. Asian Strategy - What Investors are Focusing On (Timothy Moe) Investors are contemplating whether the early-April (301 survey-related reports and potential further tariff measures) will be a risk window or a market-clearing event. According to our strategists, the answer depends on: a) market trading performance during this period; b) the severity of any potential additional tariffs; c) the response of affected American trading partners. Take China as an example, the expectations of Goldman Sachs Group, Inc. (GSe) and the market have already incorporated the 20% tariff increase into forecasts for the economy and corporate earnings. Further significant increases in tariffs, without domestic policy support to offset the impact, could lead markets to lower profit expectations and trigger profit-taking in stocks.Spitting (The MSCI Inc. Class A China Index has risen 23% year-to-date).On the other hand, in recent communications with investors, a common question has emerged: whether the background of a weakening US economy and stock market will lead investment portfolio funds to flow towards Asia (or more broadly, emerging markets). Our strategists believe that the best conditions for this scenario to occur are: a) widening divergence in economic growth between Asia / emerging markets; b) a weakening US dollar; c) volatile U.S. stock market. Our strategists remain bullish on Asian markets, expecting a 9% upside potential for the MSCI Inc. Class A Asia Pacific ex Japan Index (MXAPJ 640), overweighting China (H shares and A shares), Japan, and Singapore markets, focusing on alpha themes such as stocks benefiting from artificial intelligence, domestic demand-related stocks, defense spending, shareholder returns, and upward earnings expectations. Chinese consumer industry - Government's determination to boost consumption enhances market confidence, policy implementation is key (Michelle Cheng) Although our analysts still favor the unique opportunities brought by industries/companies that can tap into untapped market areas, as emphasized in their "2025 Consumer Outlook Report," they believe there is upside potential in the following areas: 1) If the job market and corporate profits recover, wage increases will increase households' disposable cash flow; 2) The improvement in social security such as pensions, maternity subsidies, and medical insurance will lower the savings rate, thus increasing households' disposable cash flow; 3) The wealth effect from stock market gains and a stabilizing real estate market will benefit retail sales in first-tier cities. In terms of categories, our analysts favor leading white goods, sports brands, diversified retailers, dairy products, and beverages. The stocks they favor include Anta Sports (02020) (included in the Asia Pacific Confidence Top Picks list), Moutai (600519.SH), Midea (000333.SZ), Yutong Bus Co., Ltd. (600066.SH), La Chapelle (06181), Mengniu (02319), Tsingtao Brewery H shares (00168), Master Kong (00322), GIANT BIOGENE (02367), MNSO (09896), Hisense (000921.SZ), CR BEVERAGE (02460), Hangzhou Robam Appliances (002508.SZ), Yantai China Pet Foods (002891.SZ), Ligao Foods Co., Ltd (300973.SZ). Chinese commodities - Research focus: attention on debt resolution and infrastructure construction, and 50 million tons of steel (Trina Chen) Our analysts conducted research on Chinese commodities in the first half of 2025 in the first week of March, during which they had nearly 40 meetings and phone calls with local macro and micro field experts. Early feedback confirmed their optimistic expectations for the demand for China State Construction Engineering Corporation in 2025, as local government debt resolution is driving infrastructure construction activities. Discussions on the supply side indicated that policies will take a more resolute approach to production control in response to overcapacity issues, but the progress of long-term capacity management is slower than expected. Our analysts remain positive on cement, copper, and bauxite, hold a negative view on coal, and gradually shift towards a bullish outlook on steel and aluminum.