Goldman Sachs Group Inc. lowered its rating on Hong Kong-traded China stocks due to low earnings growth and a potential consensus downgrade. The bank upgraded shares in India, citing the market’s strategic appeal.

“With valuations generally at fair levels relative to the macro backdrop, we expect earnings to be the main driver of returns,” strategists including Timothy Moe wrote in a note, referring to Asia markets. The investment bank cut Hong Kong-listed Chinese companies to market-weight and Hong Kong firms to underweight.

The Wall Street bank has downgraded its views on China equities several times this year amid pessimism in the country’s stock market. In August, it cut the full-year earnings-per-share growth estimate for the MSCI China Index to 11% from 14%, and reduced the 12-month index target to 67 from 70. The gauge has lost nearly 3% since then.

Still, Goldman remains overweight on Chinese onshore shares. Sectors related to China’s rebalancing toward areas of higher productivity and greater self-sufficiency such as artificial intelligence and new infrastructure might have a good run, they said.

“These ‘alpha’ opportunities, which are more widely present in the onshore market, counterbalance the structural challenges of slowing growth stemming from the housing sector downturn, high debt levels, and adverse demographics,” the strategists wrote.

Meanwhile, India is expected to see “the best structural growth prospects in the region” with mid-teens earnings growth over the next two years, according to Goldman.

The market’s strategic appeal, particularly given its largely domestically driven growth, offers investors a wide array of alpha-generating themes, including make-in-India, large cap compounders and mid-cap multibaggers, they said.