(Yicai) May 16 -- Goldman Sachs Group and Nomura Group have raised their outlook for Chinese stocks after China and the United States temporarily suspended their punitive tariffs and the Asian country recently rolled out fresh policy stimulus.

Goldman Sachs yesterday hiked its 12-month targets for the MSCI China Index and the CSI 300 Index to 84 from 78, and to 4,600 from 4,400, respectively, while maintaining its overweight rating on Chinese equities -- a clear buy signal with double-digit growth potential.

Trade tensions between China and the US have temporarily eased, the American investment bank noted. In this context, Goldman has raised its economic growth forecasts for both countries, lowered the probability of a US recession, delayed its forecast for Federal Reserve interest rate cuts, and adjusted its expectations for further easing measures in China.

This marks the second upgrade in a week by the financial behemoth. On May 8, the New York-based firm reaffirmed its overweight stance and raised its 12-month targets for the MSCI China Index to 78 from 75, and for the CSI 300 Index to 4,400 from 4,300.

Last week, the People’s Bank of China, the China Securities Regulatory Commission, and the National Financial Regulatory Administration jointly rolled out a series of financial support measures, including interest rate cuts and a relaxation in the reserve requirement ratio.

Goldman Sachs said these targeted, demand-side policies are aimed at stabilizing the real estate market, supporting small and medium-sized enterprises, boosting shareholder returns, and fostering a more stable and healthy stock market.

Nomura also upgraded its rating on Chinese stocks to "tactical overweight" from "neutral" on May 13, signaling a short to mid-term bullish outlook.

The Japanese investment bank noted that the China-US tariff truce was an unexpected development that could boost market sentiment in the near term, adding that the rebound in Chinese equities over the past month is likely to roll on.

Other major foreign financial institutions have echoed this optimistic outlook. UBS and Invesco have both expressed confidence in China's market prospects.

"Significant tariff cuts between China and the US could help China’s capital markets regain upward momentum," said Meng Lei, China equity strategist at UBS Securities.

Given the low starting point and new rounds of policy support, earnings for Chinese mainland-listed companies are expected to recover quarter on quarter, Meng said. In terms of valuations, clearer fiscal policy direction, increased market liberalization, and strong backing for the private sector may help reduce equity risk premiums, he added.

Zhao Yaoting, global market strategist for Invesco Asia-Pacific ex-Japan, said the recent tariff easing, trend toward trade policy normalization, and the Trump administration’s current focus on tax cuts may propel the market back to pre-2025 levels.

Editor: Emmi Laine