MXAPJ rose another 1.1%, with the AI theme and earnings beats supporting Asia Pacific ex Japan markets

Overview

This report is Goldman Sachs Asia-Pacific Weekly Kickstart, focusing on the MSCI AC Asia Pacific ex Japan (MXAPJ) and regional Asia-Pacific markets, sectors, fund flows, valuations, earnings season, and macro policy risks. The report notes that MXAPJ continued to rise by 1.1%, mainly supported by renewed strength in AI-related themes, a positive start to the 1Q26 earnings season, and improved risk appetite driven by the extension of the US-Iran ceasefire. At the same time, the Strait of Hormuz remains closed, Iran has accused the US of violating the ceasefire, and Fed chair candidate Warsh emphasized Fed independence and called for a new inflation framework, all of which form part of the macro and policy backdrop.

Core views

The core views are as follows. First, short-term momentum in Asia Pacific ex Japan markets has improved, with Taiwan, Korea, and Malaysia performing strongly, while technology hardware and semiconductors, capital goods, and utilities led gains. Second, the 1Q26 earnings season has started broadly positively, with the proportion of companies beating expectations clearly exceeding those missing expectations, and actual earnings progress outperforming historical seasonality. Third, fund flows have recovered but remain uneven: foreign inflows into EM Asia ex-China have recouped part of the prior outflows, with Taiwan showing the clearest rebound, while Korea, India, and Taiwan have still been the markets with the most significant net selling since late February. Fourth, the index rebalancing cycle has begun, with MSCI set to announce review results first in mid-May; related changes could have a meaningful flow impact on passive funds, long-only funds, hedge funds, and retail investors. Fifth, with MXAPJ currently at 824 and a 12-month target of 920, there is still medium-term upside potential.

Analysis framework

The report uses a regional strategy weekly framework that combines analysis of market price performance, sector performance, foreign and fund flows, EPFR active fund positioning, 1Q26 earnings results, valuation ranges, macroeconomic indicators, policy risk indicators, and the event calendar. Data sources include MSCI, FactSet, I/B/E/S, EPFR, Bloomberg, Haver, local exchanges, index providers, and Goldman Sachs Global Investment Research.

Methodology notes

• equity_strategyMXAPJ regional market and sector scorecard

  Assess the allocation attractiveness of Asia Pacific ex Japan markets using returns, valuation, growth, earnings revisions, and foreign fund flows.

  The report compares returns, valuations, earnings revisions, and fund flows across markets and sectors to help judge relative regional and sector strength.

• fund_flowsFII and EPFR fund positioning tracking

  Track net foreign buying, active fund overweights or underweights versus benchmark, and monthly allocation changes.

  The report shows that EM Asia ex-China recently saw US$17bn of net buying, and observes that EM/AEJ active funds increased China allocation and reduced India and Taiwan allocation in March.

• earnings_review1Q26 earnings beat analysis

  Compare reported companies' earnings growth, progress toward full-year expectations, and beats or misses relative to consensus expectations.

  168 companies have reported 1Q26 results, covering 26% of MXAPJ market cap; 54% beat expectations, 25% missed, and the median surprise was +6%.

• index_eventIndex rebalancing event monitoring

  Track review and rebalancing dates for major indexes such as MSCI and FTSE, and assess potential fund flow impacts.

  The report notes that the 2Q 2026 index rebalancing cycle has already begun, with MSCI set to announce results first in mid-May; index inclusions and deletions typically trigger passive and active fund flows.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• MXAPJ

  Core index under coverage

  Strengths

  Renewed strength in the AI theme, a positive start to 1Q26 earnings, and a 12-month target of 920 above the current 824.

  Weaknesses

  Divergence in market and sector performance within the region, with software, healthcare, and consumer retail lagging.

  Comparison

  Taiwan, Korea, and Malaysia outperformed this week, while Indonesia, Thailand, and Singapore underperformed.

  Risks

  Geopolitics, repeated fund flow reversals, weaker-than-expected earnings revisions, valuation pressure.

• Taiwan

  Key beneficiary market and market seeing foreign flow replenishment

  Strengths

  The market rose 7% this week, foreign investors net bought US$4.1bn, and it is the only one among Korea, India, and Taiwan to have recovered more than 50% of its previous selling.

  Weaknesses

  It has still seen cumulative net foreign outflows of US$14bn since February 27, and retail investors sold US$3.5bn this week.

  Comparison

  Compared with Korea and India, Taiwan has seen a stronger rebound.

  Risks

  Tech supply chain volatility, renewed foreign outflows, retail flow pressure.

• Korea

  Market linked to tech exports and capital spending

  Strengths

  Up 4% this week, with Q1 GDP rebounding strongly and beating consensus, driven by tech exports and capital spending.

  Weaknesses

  Foreign investors have net sold US$22bn since February 27, and still net sold US$0.9bn this week.

  Comparison

  The scale of net foreign selling is larger than in India and Taiwan, but retail investors bought US$0.5bn this week.

  Risks

  Exports in the first 20 days of April were dragged down by weakness in non-tech products, and foreign investor pressure remains heavy.

• India

  Important Asia-Pacific market and underweight target for funds

  Strengths

  High long-term structural investor interest, with the RBI taking a wait-and-see stance at the policy level.

  Weaknesses

  Foreign investors have net sold US$17bn since February 27, and EM/AEJ active funds reduced India allocation in March.

  Comparison

  The report says India had a relatively low proportion of companies beating expectations in 1Q26.

  Risks

  Middle East conflict raises both upside inflation risk and downside growth risk.

• AI and technology hardware/semiconductor theme

  Main driver this week

  Strengths

  The AI theme regained strength, with technology hardware and semiconductors leading gains and supporting the performance of markets such as Taiwan and Korea.

  Weaknesses

  The information technology sector was not the strongest in terms of 1Q26 beat rate, and the software sector lagged this week.

  Comparison

  Technology hardware and semiconductors outperformed software, healthcare, and consumer retail.

  Risks

  Insufficient earnings delivery, excessive valuation, export or supply chain disruptions.

Key data

• MXAPJ weekly performance+1.1%Taiwan +7%, Korea +4%, and Malaysia +2% led; Indonesia -8%, Thailand -3%, and Singapore -2% lagged.
• Current MXAPJ index level824Pricing data as of Friday, April 24, 2026, 4:00 p.m. HKT.
• MXAPJ 12-month target920Implies about 11.7% upside from the current level of 824.
• Number of companies that have reported 1Q26168 companies, covering 26% of MXAPJ market capThe report states that reported companies posted year-on-year and quarter-on-quarter earnings growth of +77% and +54%, respectively.
• 1Q26 earnings surprise54% beat expectations, 25% missed, median surprise +6%Taiwan and Thailand had higher proportions of companies beating expectations, while India had a lower proportion; by sector, materials and industrials saw more beats, while information technology and consumer discretionary saw fewer.
• Recent foreign inflows into EM Asia ex-ChinaUS$17bnRecovering about 22% of the US$79bn outflow since the February peak.
• This week's foreign flowsTaiwan +US$4.1bn, Korea -US$0.9bn, ASEAN -US$0.3bnTaiwan was the main positive contributor, while Korea and ASEAN offset part of the inflows.
• Net foreign flow change since February 27Korea -US$22bn, India -US$17bn, Taiwan -US$14bnTaiwan is the only one of the three to have recouped more than 50% of its previous selling.
• Asia market retail flows year to dateUS$24bn inflowThis week Taiwan retail investors sold US$3.5bn, while Korea retail investors bought US$0.5bn.
• Developed market fund flowsUS funds net bought US$18bn, Europe -US$1.1bn, Japan -US$0.8bnReflecting continued regional divergence in global capital flows.

Impact & implications

In terms of investment implications, the report reinforces the short-term positive feedback loop for Asia Pacific ex Japan equities: the AI chain and earnings beats are supporting upward momentum in the index, with tech-heavy markets such as Taiwan and Korea benefiting more clearly. However, fund flows are still in the early stage of recovery, and the cumulative net foreign selling pressure in Korea, India, and Taiwan has not yet been fully reversed. Index rebalancing may bring stock- and market-level passive flow disruptions, and potential inclusions, deletions, and weight adjustments should be tracked alongside announcements from MSCI and others. On the macro side, Middle East conflict, the Fed policy framework, US data, Korean exports, Taiwan industrial production, and the RBI's stance in India will jointly affect risk appetite, inflation expectations, and growth expectations.

Risks

• Although the US-Iran ceasefire has been extended, the Strait of Hormuz remains closed and geopolitical risk has not been eliminated.
• Middle East conflict could both increase upside inflation risk and depress growth expectations.
• Korea, India, and Taiwan have still seen large net foreign selling since late February, and the recovery in fund flows may be uneven.
• Index rebalancing may trigger passive and active fund movements, causing short-term disruptions in related markets and individual stocks.
• If subsequent 1Q26 earnings reports fail to match the current positive start, market earnings expectations and risk appetite could decline.
• Changes in the Fed policy framework and US macro data could affect global interest rates, the US dollar, and Asian equity valuations.

What to watch

• MSCI's mid-May index review announcement and subsequent major index rebalancing dates.
• The proportion of beats, the proportion of misses, and the direction of earnings revisions in subsequent 1Q26 earnings releases.
• Whether foreign flows into Taiwan, Korea, India, and ASEAN continue to improve.
• Monthly allocation changes by EM/AEJ active funds across China, India, Taiwan, Korea, and ASEAN.
• Implementation of the US-Iran ceasefire, the status of the Strait of Hormuz, and the impact of Middle East conflict on oil prices and inflation.
• US core retail sales, initial jobless claims, Fed chair selection, and policy framework discussions.
• Korean exports, Taiwan industrial production, RBI policy commentary in India, and the Asian political event calendar.