By Shiyin Chen
(c) 2010 Bloomberg News
Thursday, July 15, 2010; 12:00 AM
July 15 (Bloomberg) -- Goldman Sachs Group Inc. raised its targets for an index of Asian stocks, citing a "turning point" in China's economic policy outlook, easing concerns over external growth risks and the completion of stock sales.
Analysts led by Timothy Moe raised their three-month forecast for the MSCI Asia-Pacific excluding Japan Index to 425 from 405, and increased their six-month target for the gauge to 440 from 430, according to a Goldman Sachs report yesterday. They maintained their 12-month forecast of 485.
The MSCI index slipped less than 0.1 percent to 399.9 as of 10:44 a.m. in Singapore. The measure has retreated 4 percent this year amid concern that the spread in Europe's sovereign debt crisis and efforts by China to curb surging asset prices and property speculation will derail the global recovery.
"We see positive market catalysts on the horizon," the analysts wrote. "We keep our fundamental views unchanged, but now forecast returns to be more front-loaded as risk appetite may return sooner."
Chinese stocks are the worst performers in Asia this year, with the Shanghai Composite Index tumbling 25 percent. A government report today showed gross domestic product rose 10.3 percent in the second quarter, after expanding 11.9 percent in January to March.
Growth in industrial output also rose a less-than-estimated 13.7 percent in June and inflation cooled to 2.9 percent amid efforts by policy makers to rein in liquidity and curb mortgage lending has succeeded, reports today showed.
"Investor sentiment is much more focused on policy and has already priced in the softening of some economic indicators," the Goldman Sachs analysts wrote. "Recent signals from policymakers have had pronounced effects in the equity market, suggesting that a turning point may be near."
The slowdown in China coincides with increasing concern the economic rebound in Europe and the U.S. may be faltering.
Federal Reserve officials lowered their forecast for growth this year to a range of 3 percent to 3.5 percent versus 3.2 percent to 3.7 percent in April, according to minutes of their June meeting that were released yesterday. Growth in Europe's services and manufacturing industries also slowed for a second month in June and German investor confidence declined for a third month in July as governments stepping up budget consolidation measures.
Still, the International Monetary Fund last week predicted the global economy will expand 4.6 percent in 2010, the fastest growth since 2007, instead of a previously projected 4.2 percent.
Investors may have also "over-discounted" the impact of upcoming share sales on markets, according to the Goldman Sachs analysts. About $119 billion of capital has already been raised this year, with another $158 billion of supply set for the rest of the year, the brokerage estimated.
Agricultural Bank of China Ltd. rose as much as 2.2 percent in its first day of trading in Shanghai today after raising $19.2 billion in the world's biggest initial public offering in four years that had lured investors from Qatar's sovereign wealth fund to Standard Chartered Plc.
The amount of supply this year "looks reasonable," the Goldman Sachs analysts wrote. "Recent news stories have reported that upcoming deals are securing a substantial strategic shareholder base, and if they turn out to be more oversubscribed than investors expect, the market may eventually realize that the potential supply has been over-discounted."
From The Washington Post Published on Thursday, July 15, 2010; 12:00 AM