Goldman Sachs upgrades India shares, downgrades Hong Kong-based China stocks. Here's why

Goldman Sachs Group Inc upped India's stock market rating citing its strategic appeal and reduced its rating on Hong Kong-traded China stocks on account of a potential consensus downgrade and low earnings growth.

India, the global investment bank said, should see “the best structural growth prospects in the region” with mid-teens earnings growth over the next two years, Bloomberg reported it as saying.

As per the report, the Indian market’s strategic appeal, due to its largely domestically-driven growth, offers investors a wide array of "alpha-generating "themes. This included Make-in-India, large cap compounders and mid-cap multibaggers, Bloomberg reported the Wall Street bank as saying.

“These ‘alpha’ opportunities, which are more widely present in the onshore market, counterbalance the structural challenges of slowing growth stemming from the housing sector downturn, high debt levels, and adverse demographics,” the Goldman Sachs noted.

Goldman Sachs, as per Bloomberg, suggested that earnings to be the main driver of returns for Asia markets with valuations generally at fair levels relative to the macro-economic backdrop. The investment bank cut Hong Kong-listed Chinese companies to market-weight and Hong Kong firms to underweight, as per the report.

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