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Goldman Sachs cuts earnings expectations for the MSCI China index

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Yahoo Finance Live anchors discuss Goldman Sachs cutting its earnings expectations for the MSCI China index.

Video Transcript

BRAD SMITH: Also, while we're on the topic of some of the notes that are out there, we've got to talk about Goldman Sachs. Goldman Sachs slashed its earnings outlook for the MSCI China index to zero growth for this year. That's down from 4% previously as the country's property market continues to slump. Now analysts also cut their MSCI price target over the next 12 months to 81 down from 84. The index tracks over 700 Chinese stocks, including names like Tencent, Alibaba, and JD.com.

Within the region, especially as we're looking not just across the operations for production, but even more so where there's still a headwind on the COVID front and the zero COVID policy or the zero tolerance COVID policy, that's going to continue to be one of the headwinds that I think economists not just looking at China, but also internationally for some of the companies that are reliant on their revenue coming in from China, that they're also going to have to price into some of the equity market names here in the US, too.

BRIAN SOZZI: Yeah, complicated note by Goldman here. Lots of fancy charts. But my takeaway is that we're going to get Apple earnings later this week. And here's going-- to your point, here's likely another company to show just severe stress on their business in China because of those lockdowns and economic growth slowdown. We were talking about in the morning meeting this morning, now they're offering discounts on iPhones. And that does not happen in a rip roaring China economy.

JULIE HYMAN: Yeah, a couple of things to mention here related to COVID. First of all, China is now focusing on Shenzhen, that region, and not shutting down factories, but requiring them to operate in a sort of closed loop where there is not outside contamination, so to speak, in that area. There is a Foxconn factory there which makes iPhones. CNOOC as well, the big oil producer. That's not Foxconn's main iPhone production facility, but, nonetheless, that is under focus from that.

Shenzhen still only had 21 cases for Saturday, which is up. You know, it's up, but it's still a lot smaller than some of the other areas. One of the reasons, by the way, to come back to the Goldman Sachs note for a moment. One of the reasons for the downgrade was property. The property stocks in China.

However, there was a report over the weekend that China's state council approved a fund to support 12 property developers. So we saw a little bit of a rebound on some of those property stocks on that. But, obviously, Goldman is not so optimistic for the longer term for that sector. So we'll see.