Goldman Sachs Faces Criticism for Pessimistic Downgrade of Chinese Banks, State Media Reports
BEIJING (Reuters) – In a recent editorial, state-backed Securities Times criticized Goldman Sachs (NYSE:GS) for its downgrade of major Chinese lenders, calling it based on “unwarranted pessimistic assumptions.” The move comes at a time when concerns about the banking sector are intensifying amid a volatile economy.
The newspaper stated, “It is unwise to adopt a bearish stance on the fundamentals of Chinese banks solely on pessimistic assumptions, as there is a significant degree of misinterpretation involved.”
Goldman Sachs issued a report on Wednesday, downgrading Agricultural Bank of China (OTC:ACGBF) (AgBank) from “Neutral” to “Sell,” while also lowering the ratings of Industrial and Commercial Bank of China (ICBC) and Industrial Bank from “Buy” to “Sell.”
Following the release of the report, Chinese bank shares listed in Hong Kong experienced a sharp decline.
According to the report, investors are growing concerned about Chinese banks’ exposure to local government debt, the potential risks to earnings stemming from such debt, and the diverging performance of individual banks.
To address these concerns, Chinese policymakers are actively increasing efforts to stimulate infrastructure investment and address hidden local government debts, as highlighted by the Securities Times.
Goldman Sachs has not yet responded to the newspaper’s request for comment regarding the editorial.
