Goldman Sachs has reaffirmed its bullish stance on Chinese assets for 2025. Notably, the investment giant has significantly increased its holdings in a particular A-share company while also adjusting target prices for several H-sharesInterestingly, the majority of these investments are predominantly concentrated within the automotive and banking sectorsThis prompts an exploration into which specific company Goldman Sachs is focusing on and why there is a growing optimism surrounding these two sectors.

Following its upgrade of the Chinese stock market to an “overweight” rating on October 5, 2024, Goldman Sachs has consistently remained optimistic about Chinese investments

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Kinger Lau, the chief China equity strategist at Goldman Sachs, maintains an “overweight” rating on both A-shares and H-shares, forecasting a potential return of approximately 20% in the coming year for both markets.

Recently, Goldman Sachs has actively begun allocating real capital towards Chinese assetsAccording to data from Choice Financial Terminal, as of January 10, Goldman Sachs International has made its debut as a significant shareholder in the A-share listed company Longli Technology, occupying the position of the seventh-largest circulating shareholder with 1.5885 million sharesOther notable institutions increasing their stakes include China Life Insurance, ICBC AXA Life, and Cinda Australia’s star manager Feng Mingyuan's Xin’ao New Energy Industry.

Goldman Sachs' investment strategy appears to be closely linked to the promising developments in the automotive sector.

Longli Technology specializes in LED and CCFL backlighting solutions and has focused on the research and development of backlight display modules

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With its core technologies protected by proprietary intellectual property and extensive production experience, it has steadily evolved into one of the more influential backlight display module companies in China, recognized for its strong R&D capabilities and large-scale productionOn January 7, the company engaged with institutional investors, garnering interest regarding its automotive sector developmentsIn response, it highlighted its well-established partnerships in automotive backlight modules (utilizing both LED and Mini-LED technologies) with notable Tier 1 clients, including Conti, Faurecia, Visteon, Desay SV, and AUO, alongside terminal clients like BYD, NIO, Li Auto, Xpeng, SAIC, Geely, Zeekr, and Hyundai. "Moving forward, the company will continue to concentrate on the development of vehicle display business and enhance its core competitiveness."

Longli Technology further elaborated that the market trends indicate a significant rise in screen presence within vehicles, attributed to the proliferation of smart cockpit technologies, underscoring the increasing use of larger, high-definition, and interactive displays

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The firm asserts its competitive edge in the Mini-LED vehicle backlight display technology domain, positioning itself strongly in terms of technological reserves, patents, and mass production capabilitiesGiven this positioning, Longli’s performance in the automotive display sector is poised for further growth.

Amid its investments in Longli Technology, Goldman Sachs has also raised target prices and investment ratings for multiple H-shares, predominantly related to the automotive field.

On January 15, Goldman Sachs released a report indicating that Xiaomi (01810.HK) remains in the early phases of a long-term ecosystem expansion, with its integrated strategy combining vehicle, home, and personal technology gaining traction

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With a favorable market demand outlook and production capacity improvements unrelated to trade-in subsidies, Goldman Sachs has significantly raised its sales forecast for Xiaomi’s upcoming vehicles (SU7, SU7 Ultra, YU7, and a third model) for 2024 to 2026, resulting in an increase of 4%, 21%, and 48% against market expectationsConsequently, Goldman Sachs's revenue predictions for Xiaomi in 2025 and 2026 have been adjusted upward by 4% and 13%, respectively.

Despite being recognized as the top-performing company in the Hang Seng Index for 2024, and due to amendments in revenue and earnings per share forecasts, Goldman Sachs continues to anticipate a price rise for Xiaomi, increasing its target price from HKD 33.3 to HKD 38, while reaffirming a 'Buy' rating

As of January 15, Xiaomi's shares closed at HKD 33.600.

Meanwhile, Goldman Sachs predicts that BYD will expedite the deployment of autonomous navigation features across its mainstream vehicle models to bolster its competitive edgeWith industry-leading cost advantages and execution efficiency, BYD is positioned to be one of the strongest players this yearIn light of this, Goldman Sachs has elevated its price target for BYD shares from HKD 359 to HKD 364, maintaining a 'Buy' ratingBYD shares recently closed at HKD 258.800.

Goldman Sachs has also made an assertion regarding the extension of China's automobile subsidy policies, anticipating a 3% growth in retail sales in China's passenger car market by 2025, with the penetration rate of new energy vehicles expected to rise to 60%, alongside an approximate 30% year-on-year increase in the sales of new energy vehicles. Furthermore, it anticipates the introduction of 120 new electric vehicle models hitting the market in 2025, up from 112 in 2024. With profitability improvements for contract manufacturers from the previous year, competitive dynamics are projected to remain intense, shifting the competitive focus within the new energy vehicle landscape from hardware to software solutions, transitioning from basic ADAS features to more advanced functionalities focused on autonomous navigation.

Moreover, since the start of 2025, Goldman Sachs has adjusted target prices or discerned new investment ratings for various A and H shares, including multiple banking stocks

In this context, Yang Shuo, a financial analyst for Goldman Sachs, publicly stated that multiple factors are expected to reshape the valuations of Chinese commercial banking stocks"With the recent injection of significant funds into state-owned commercial banks by the government, the capital adequacy within these institutions is projected to improve continuously, effectively eliminating capital gaps while supporting dividend distributions."

In conjunction with these buying activities and target price revisions, announcements from listed companies since 2025 indicate that Goldman Sachs and its affiliated entities have actively participated in institutional research across ten individual stocks, many of which fall within the automotive and banking sectors.

For instance, Funeng Technology has emerged as a leading global manufacturer of soft-packed power and energy storage batteries, being among the first in China to achieve mass production of ternary soft-packed power batteries

Recently, Guangzhou Industrial Control’s acquisition of Funeng has attracted significant attention, as they are attempting to establish an automotive parts group and rapidly expand in the automotive components market by integrating a battery industry leaderThis union aims to enhance control over critical aspects and weaknesses within the new energy vehicle supply chainWith Funeng Technology among the few listed lithium battery firms, the acquisition is expected to leverage state-owned enterprise capital advantages, management expertise, and the technological prowess of Funeng, magnifying its influence within the industry.

Another example is Zhaowei Electric, which operates as a comprehensive micro-drive system solution provider, engaging in design, development, and manufacturing

It is one of the early established suppliers of core components to leading automotive clients, maintaining long-term and stable relations with its partnersAs the new energy vehicle industry continues its rapid expansion, the homegrown supply chain deployment has presented numerous opportunities for the company, inciting an expanding collaboration depth and breadth with its clientsMoving forward, the company intends to persevere in acquiring new customers and projects, and expanding its product range to support its growth robustly.

It is noteworthy that, from a market perspective, the shares of both companies mentioned have recently showcased relatively strong performances, with Zhao Wei Electric witnessing a cumulative rise exceeding 40% between January 7 and January 15, achieving a historic peak.

(The stocks mentioned in this article are purely for example analysis and do not constitute any buy or sell recommendations.)