Goldman Sachs Group Inc strategists raised their forecast for Asian stocks, citing a more favorable macro environment and greater certainty around tariffs.

The 12-month target on the MSCI Asia Pacific ex-Japan Index was lifted by 3 percent to 700, implying a 9 percent return in dollar terms during the period, strategists led by Timothy Moe wrote in a note Friday.

The team also upgraded Hong Kong stocks to market-weight, touting them to be among the key beneficiaries of the dollar weakness resulting from the Federal Reserve’s easing cycle. 

“Tariff imposition and easing monetary policy are likely to be important macro influences on Asian equity markets in the third quarter,” the strategists said. Even if the tariff rates imposed are somewhat above current baseline expectations, “the fundamental growth impact may not be as negative as markets feared in early second quarter,” they said.

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Earnings growth will also be a dominant driver of returns, they added, given that regional stocks’ 14 times forward earnings ratio is in line with “macro-modeled fair value.”

Goldman Sachs had downgraded Hong Kong stocks to underweight in November, due to weak property and retail sectors. The Hang Seng Index and the MSCI Hong Kong Index have each risen at least 18 percent since then.