Analysts at Goldman Sachs say that they are “seeing the light at the end” as Covid cases drop in China. If business activity returns back to normal, here are some stocks that Goldman Sachs analysts believe will make the greatest comebacks. After reaching 42 in March/April, which was a high for the bank in two years, the investment bank’s index of China’s impact on China has fallen by 11 points over the past two weeks. That measure — called the “Effective Lockdown Index” — could fall by another 20 points to a print of 10 by the end of the year, Goldman’s economists predict, assuming that regular virus testing becomes a successful way of preventing large-scale lockdowns. Beijing is one of many Chinese cities that require people to submit virus testing results for entry to supermarkets and other public areas. Two months ago, Shanghai had been under lockdown. The government has announced that they will be able to resume business as usual by the middle of June. “We’d focus on select manufacturing-related names to tactically position for the recovery trade,” the Goldman analysts said in a May 16 report. The analysts expect that government policy will place priority on supply chains. This will ensure that the recovery of manufacturing stocks is faster than for consumers. Of the 40 stocks Goldman picked, the following are the three names that have been most affected by China’s Covid controls, according to the bank’s lockdown index — and could see the greatest benefit as restrictions ease. GoodWe Technologies GoodWe Technologies produces and sells equipment to convert and store solar energy for commercial and residential use. On the company website, you can find information about offices in Australia, Germany, the United States, and elsewhere. The company’s 2021 net profit, which excludes items, increased by 1.69% to 244.7 million Yuan ($36 Million). The company’s operating income soared 68.53%, to 2.68 trillion yuan. GoodWe’s headquarters is in Suzhou. It is located half an hour from Shanghai via high-speed trains. In February, Suzhou tightened Covid regulations on business activity. GoodWe, the worst-correlated stock play with Goldman’s Effective Lockdown Index at 45%, was one of Goldman’s reopening stocks plays. VeriSilicon Microelectronics VeriSilicon Microelectronics, with 44% of the lockdown index’s negative correlations, was second. The Shanghai-based company sells design and licensing for semiconductors, with research and development centers in China and the United States, according to its website For 2021, VeriSilicon reported a net loss attributable to shareholders, ex-items, of 46.8 million yuan — roughly half the 106.6 million yuan loss recorded in 2020. The operating income increased by 42% last year to 2.14 trillion yuan. Anhui Truchum Advanced Materials & Technology Anhui Truchum Advanced Materials & Technology was the third-most negatively correlated stock with Goldman’s lockdown index, at 41%. It is located in Wuhu province of Anhui, four hours drive away from Shanghai. According to Truchum, it designs and produces copper products that are used in automobiles, electrical appliances and many other applications. Truchum posted a 2021 net profit of 384.2 millions yuan that was exempted from items. That’s 70.14% higher than the year before. The company’s operating income increased by 62.57%, to 37.35 trillion yuan. — CNBC’s Michael Bloom contributed to this report.
In April industrial production fell unexpectedly because Covid controls stopped or restricted factories’ ability to function. On May 12, a worker at the washing machine manufacturing line of a Whirlpool China factory in Hefei in Anhui, China is shown.
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Analysts at Goldman Sachs say that they are “seeing the light at the end” as Covid cases drop in China. These are the stocks that they believe are most likely to rebound if normal business activity resumes.
