Goldman Sachs: China equities have the 'best risk vs reward' amidst Iran conflict

分组1 - China is focusing on energy self-sufficiency by stockpiling oil and advancing domestic energy production, particularly in renewables and electricity grid development [1] - The ongoing Iran conflict is reinforcing China's strategic objective of energy self-sufficiency [1] - China's A shares have outperformed other markets in Asia Pacific, remaining flat while other markets like Korea have seen significant declines [2][3] 分组2 - Starting conditions matter, as China was in a 10% corrective trading range for about five months, making it less vulnerable to profit-taking compared to Korea [3][4] - A shares have outperformed H shares by approximately 7% due to lower foreign ownership and a lower correlation with global markets [5][6] - The recent reporting season has shown better earnings for A shares compared to H shares, which have been affected by competition in the food delivery sector [8] 分组3 - A $35 per barrel oil shock could lead to a significant decline in Asian earnings, with the effects being nonlinear as oil prices rise [10][11][12] - The impact of oil prices on equities is not only through earnings but also through risk premiums and market volatility [14] - The US equity market has performed relatively well during the conflict, with a smaller drawdown compared to Asian markets, indicating its insulation from energy vulnerabilities [16][17] 分组4 - China is viewed as having a better risk-reward profile currently, with lower valuations and expected earnings growth of about 14% for both A shares and MSI China [20][22] - Hedge fund positioning in China is at a lower percentile compared to other markets, indicating potential for recovery as risk appetite rebuilds [23][29] - The duration and magnitude of the oil shock will significantly influence market dynamics and investor behavior moving forward [24][26][27]