Goldman Sachs supports an overweight position on China’s A-shares and H-shares, attributing this to AI-driven growth and liquidity support. Analysts predict that H-shares will gain from AI advancements, while A-shares have potential for improvement.

An increase in global fund exposure to China is observed, with H-shares likely remaining a preferred option. However, A-shares might experience better momentum shortly.

Goldman Sachs anticipates that A-shares will outperform H-shares over the next three months. The premium of A-shares over H-shares has decreased from 34% to 14% in three months, suggesting around 10% upside if it returns to the average of the past year.

Goldman Sachs has expressed confidence in the prospects of both A-shares and H-shares, highlighting artificial intelligence as a key driver for growth alongside supportive liquidity conditions. This view is supported by the observation that international funds are slowly increasing their exposure to Chinese equities. Within this, H-shares appear to remain the preferred route for many investors, yet recent trends suggest that A-shares could gather stronger momentum in the near future.

Over recent months, there has been a narrowing gap between A-share and H-share valuations. The premium that A-shares held over their offshore counterparts has tightened from 34% to 14%, a compression that might indicate further room for upside if historical price relationships are any guide. Should this trend revert to its one-year average, A-shares could still see an additional 10% advance from current levels.

With these shifting dynamics in valuation spreads and investor positioning, questions naturally arise about how market participants should navigate exposure over the coming weeks. The expectation remains that domestically traded equities will outperform their Hong Kong-listed counterparts over the next three months. If this forecast holds, traders who anticipate relative strength in A-shares may look towards vehicles that capitalise on the potential for price recovery.

At the same time, the upward move in global funds allocating capital towards China introduces another factor to consider. If this flow persists, it could provide a reinforcing effect for valuations, particularly for the segment of the market that has lagged in recent months. The relative appeal of A-shares could continue to improve as a result, particularly if liquidity conditions remain constructive and domestic momentum strengthens.

Expectations for artificial intelligence remain central to this outlook, benefiting both classes of shares, though not necessarily to the same degree. If H-shares remain the more accessible option for foreign investors seeking exposure to AI-related themes, those looking for stronger near-term movement may find A-shares more promising—especially given the valuation reset that has already taken place.

Over the coming weeks, close attention is required as valuations rebalance. With momentum shifting, a reassessment of positioning may be warranted to capture the potential discrepancies in pricing.