Goldman Sachs on Friday lowered its 12-month target for Asian equities excluding Japan, and now expects an earnings contraction for the region, on possible spillovers from weakness in China’s growth and its embattled property sector.
The Wall Street bank cut its target for MSCI’s index of Asia Pacific shares ex-Japan to 555 points from 580. It expects the index’s earnings growth to contract by 2 per cent by year-end, from no growth expected earlier.
The index currently trades around 504 points and is down nearly 0.3 per cent for the year.
China’s growth challenges pose spillover risks to the region, both in fundamental and asset-market terms, as economies such as Hong Kong, Taiwan, and Australia are sensitive to changes in Chinese demand through trade, wrote analysts at GS, led by Timothy Moe.
Earlier this week, the bank’s analysts cut their full-year earnings-per-share growth estimate for MSCI China to 11 per cent from 14 per cent and reduced their 12-month index target to 67 from 70.