Goldman Sachs rebalances 59 Asian strategy baskets, focusing on earnings momentum, capex and structural winners

Overview

This is a Goldman Sachs update on Asian strategy baskets. Its core approach is to track and trade Asian equities using macro slices, geographic revenue exposure, style factors, investor holdings and thematic baskets. The report covers the rebalancing of 59 strategy baskets and concentrates its second-half 2026 investment themes on earnings, the capex boom and structural winners.

Core views

The report's core views include: first, against a backdrop of hawkish interest rates and weak regional domestic demand, prioritize GARP, global cyclicals and rate-sensitive financials rather than local cyclicals or local consumption; second, capital-intensive companies are more likely to benefit from strategic investment, geopolitics and energy security, while capital-light companies may be pressured by AI disruption risk; third, earnings revision momentum remains effective, with a significant performance gap between earnings revision winners and losers; fourth, AI infrastructure, semiconductors, AIGC hardware, Taiwan Apple Suppliers, power, nuclear energy, the space economy and defense spending constitute important structural themes; fifth, China, South Korea, Japan and India correspond respectively to regional themes including AI, the five-year plan, shareholder returns, governance reform, economic security and self-sufficiency.

Analysis framework

The report expresses strategies through a multi-layer basket framework: macro slices divide the Asia ex-Japan market into global cyclicals, commodity cyclicals, local cyclicals, rate-sensitive financials, asset-sensitive financials and defensives; geographic revenue exposure baskets capture revenue sources from the US, Europe, China, international markets and local consumption; style and factor baskets track growth, value, GARP, momentum, earnings revisions, balance sheets, margins, dividends, capex and R&D; thematic baskets express opportunities in AI, power, defense, space, US reindustrialization and regional structural policies.

Methodology notes

• Macro slicesAsia ex-Japan Macro Slices

  Dividing Asia ex-Japan equities into cyclical, financial and defensive portfolios based on macro drivers.

  The report divides cyclicals into global cyclicals, commodity cyclicals and local cyclicals, separates financials into rate-sensitive and asset-sensitive groups, and adds defensives to track equity performance across different macro cycles.

• Style factorsGARP and Earnings Revision

  Capturing alpha through growth at a reasonable price and revisions to earnings expectations.

  The GARP basket selects stocks with both relatively high potential for sales and earnings growth and relatively low P/E and P/B valuations; the earnings revision basket compares stocks with upward and downward earnings revisions, and the report believes this dynamic factor can continue to contribute cross-cycle alpha.

• Thematic investingAI Beneficiaries and Power Up Asia

  Building thematic exposure around AI computing demand, power supply and energy security.

  The report favors AI infrastructure, AIGC hardware, semiconductors and edge AI beneficiaries, as well as nuclear energy, renewable energy and electric utilities supported by computing demand and energy security.

Asset mapping & comparison

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

• GSSZGARP

  Preferred basket

  Strengths

  Combines growth potential with relatively reasonable valuations, suitable for seeking earnings growth amid elevated interest rates and divergent demand.

  Weaknesses

  May underperform lower-valuation or defensive assets if growth expectations are revised downward or valuations come under renewed pressure.

  Comparison

  The report favors GARP, which is more attractive than local cyclicals and local consumption.

  Risks

  Falling earnings expectations, valuation compression and further weakness in Asian domestic demand.

• GSSZMSGC

  Preferred basket

  Strengths

  Has greater global cyclical exposure and is more affected by improving activity in global and developed markets.

  Weaknesses

  Sensitive to external demand and the technology hardware and semiconductor cycles.

  Comparison

  The report favors global cyclicals over local cyclical GSSZMSDC and local consumption GSSZDOMC.

  Risks

  Slowing global growth, a stronger dollar and higher interest rates, and a downturn in the technology cycle.

• GSSZMSFR

  Preferred basket

  Strengths

  Rate-sensitive financials such as banks and insurers may benefit from higher rates, capital market activity and wealth effects.

  Weaknesses

  Earnings sensitivity may suffer if credit risks rise or the yield curve becomes unfavorable.

  Comparison

  The report identifies rate-sensitive financials as a selective preferred financials direction.

  Risks

  A policy shift toward rate cuts, deteriorating asset quality and declining capital market activity.

• GSSZHALO

  Preferred basket

  Strengths

  Capital-intensive companies have large asset bases and lower obsolescence risk, benefiting from strategic investment, geopolitics and energy security.

  Weaknesses

  Capex cycles are long, while asset turnover and returns may be affected by macroeconomic volatility.

  Comparison

  The report favors capital-intensive companies over capital-light GSSZLAHO.

  Risks

  Capex returns below expectations, reduced policy support and higher financing costs.

• GSSZREVW / GSSZSERV

  Earnings momentum expression

  Strengths

  The earnings revision winners and strong earnings revision baskets have significantly outperformed their corresponding short baskets year to date.

  Weaknesses

  Momentum factors may reverse at an inflection point in earnings expectations or during a market style rotation.

  Comparison

  The report believes upward earnings revisions relative to downward revisions remain a source of cross-cycle alpha.

  Risks

  Overcrowded consensus expectations, slowing upward revisions and style rotation.

• GSSZAIHW / GSSZAISM / GSSZAPPL

  AI beneficiary themes

  Strengths

  Supported by rising demand for AI servers, general-purpose servers, the memory cycle and agentic AI computing.

  Weaknesses

  Highly dependent on hardware upgrades, semiconductor supply and demand, and upgrades to end-market specifications.

  Comparison

  The report continues to favor AI infrastructure and edge AI beneficiaries.

  Risks

  A slowdown in AI capex, price declines caused by easing supply chain bottlenecks, and weaker-than-expected end-market demand.

• GSSZNUCL / GSSZEVMT / GSSZPOWE

  Power and energy security themes

  Strengths

  Rising AI computing demand and energy security awareness support nuclear energy, renewable energy and electric utilities.

  Weaknesses

  Policy, subsidies and electricity pricing mechanisms have a significant impact on earnings.

  Comparison

  The report positions nuclear energy as a strategic direction, renewable energy as a tactical direction, and power and utilities as core holdings.

  Risks

  Policy execution below expectations, declining project returns and lower-than-expected growth in electricity demand.

• GSSZADEF / GSSZDEFS / GSSZSPCE

  Defense and space themes

  Strengths

  Supported by geopolitical risks, defense budgets, order backlogs, policy support and structural demand.

  Weaknesses

  Thematic valuations and the pace of order fulfillment may be volatile.

  Comparison

  The report believes recent pullbacks in defense-related stocks may offer better entry points, while the space economy offers a relatively attractive risk-reward profile.

  Risks

  Delays in defense spending, order execution below expectations, and crowded or retreating thematic fund flows.

Key data

• Number of rebalanced strategy baskets59The report says this update rebalances 59 strategy baskets, which can be tracked on Bloomberg and GS Marquee.
• Number of style and factor baskets25The report says this update rebalances all 25 style & factor baskets.
• Year-to-date relative performance of Consensus Revision Winners vs. Losers+57pp YTDThe report uses this data to demonstrate that earnings revision momentum remains a source of alpha.
• Year-to-date relative performance of Strong vs. Weak Earnings Revisions+36pp YTDThe report uses this data to support the performance advantage of the strong earnings revision basket over the weak earnings revision basket.
• Geographic revenue exposure baskets6These cover revenue sources including the US, Europe, China, international markets and local consumption.
• Constituents of an individual macro slice basket40 large-cap stocks, with a 10% single-stock capMacro slice baskets consist of large-cap stocks in the MXASJ Index and are classified by GICS sector.
• Liquidity threshold for geographic exposure basketsFree-float market capitalization > US$1bn, 6-month ADVT > US$5mnThe report states that geographic exposure baskets are ranked by the latest revenue exposure, subject to market capitalization and trading volume constraints.

Impact & implications

For investors, the report provides a set of tradable and trackable Asian equity strategy expressions rather than a single-stock recommendation. The implication is that, in an environment of elevated interest rates, weak domestic demand, rising AI computing and energy security needs, and stronger geopolitical and industrial policies, portfolio allocations can tilt toward global demand, reasonably valued growth, earnings revision winners, capital-intensive companies, AI infrastructure, power, aerospace and defense, and selected regional policy beneficiaries.

Risks

• Past performance and historical backtests are not indicative of future results.
• The tradability of baskets depends on market conditions, including liquidity and stock-borrow constraints.
• The rebalancing results reflected on Bloomberg and GS Marquee may be subject to delays after publication.
• A hawkish interest-rate environment, weak Asian domestic demand, and fluctuations in the dollar and interest rates may affect the performance of cyclical and growth baskets.
• If AI capex, server demand, the memory cycle or end-market specification upgrades fall short of expectations, related baskets may come under pressure.
• Geopolitical, energy security and defense spending themes face risks related to policy timing and order fulfillment.

What to watch

• The policy paths of the Federal Reserve and Asian central banks, and the impact of rising rates or policy shifts on GARP, financials and long-duration assets.
• Changes in global growth, US demand and Asian export supply chains.
• Progress in AI servers, general-purpose servers, the memory cycle, semiconductor supply and demand, and specification upgrades among Taiwan Apple Suppliers.
• Electricity demand, nuclear energy policy, renewable energy policy and implementation of China's anti-involution policy.
• The space economy, defense budgets, order backlogs and re-rating opportunities.
• China's 15th FYP, shareholder returns, overseas expansion, IPO alpha and operating tailwinds for growth stocks.
• South Korea's governance reform and value-up policies, Japan's economic security and cross-shareholding reform, and India's energy security and defense self-sufficiency themes.