MXAPJ declined during the week, but continued earnings upgrades, tight AI supply-demand, and the broadening of Korea opportunities support the medium-term view
AI summary card
MXAPJ declined during the week, but continued earnings upgrades, tight AI supply-demand, and the broadening of Korea opportunities support the medium-term view
Goldman considers that the Asia Pacific ex-Japan market is pressured in the short term by foreign capital outflows and a tech pullback, while Korea, technology hardware/semiconductors, industrials, and financials still have earnings and valuation support.
- MXAPJ fell about 1.6% to 2% during the week, with downside mainly coming from tech-heavy markets such as Korea and Taiwan, and foreign capital outflows concentrated mainly in Taiwan and Korea.
- Although risk appetite has weakened in Korea, strong earnings growth, attractive valuation and under-allocated themes mean opportunities in the second half could expand from AI hardware and semiconductors to industrials, governance reform, and re-inflation beneficiaries.
- Asian technology strategists remain positive on AI infrastructure, with demand still above supply and supply-demand constraints now extending from storage to MLCC, electronic materials, wafers, and analog/power semiconductors.
- MXAPJ 2026 consensus earnings revisions have been raised 4% since June; ERLI still signals that upward revisions are continuing, although at a slower pace.
- The RADaR model shows that regional drawdown risk has fallen significantly after the recent sharp adjustment.
Report interpretation
Overview
This issue of Asia-Pacific Weekly Kickstart focuses on weekly drawdowns, flows, technology supply-demand, Korean market opportunities, earnings revisions, and macro catalysts in the Asia Pacific ex-Japan equity market. MXAPJ fell during the week, mainly due to pullbacks in tech-heavy markets, position unwinds, momentum reversal, and foreign selling, while Middle East tensions, oil price rebound, and hawkish FOMC minutes increased macro pressure. Despite that, the report remains constructive on several medium-term themes.
Core views
Core views include: first, short-term market pressure comes mainly from positioning and flow conditions rather than a broad deterioration in earnings trends; second, in the second half, Korea may expand its opportunity set from a narrow focus on AI hardware and semiconductors to a broader set including industrials, governance reform, secondary batteries, and re-inflation beneficiaries; third, demand for AI infrastructure remains strong, with supply tightness spreading from storage to MLCC, electronic materials, wafers, and analog/power semiconductors; fourth, MXAPJ earnings upgrades continue, led by North Asia and technology sectors; fifth, after the recent correction, the regional drawdown-risk model shows that downside risk has clearly declined.
Analysis framework
The report adopts a macro-strategy weekly framework, combining regional index performance, sector rotation, foreign and retail flows, leading indicators for earnings revisions, valuation ranges, risk models, policy and geopolitical risk gauges, and the upcoming macro event calendar to make cross-market comparisons for Asia Pacific ex-Japan.
Methodology notes
Asia Pacific Earnings Revisions Leading Indicator
Used to assess whether future earnings revisions are likely to be up or down; in this cycle it shows earnings upgrades remain sustainable, though the pace has slowed compared with before.
Regional Asia Drawdown Risk model
Used to assess regional market drawdown risk; in this cycle it indicates that drawdown risk has declined materially after the recent steep drop.
Regional and sector allocation framework
Compares the relative attractiveness of Asia Pacific ex-Japan markets and sectors across market returns, valuation, growth, earnings revisions, and foreign flows.
Valuation range and relative valuation analysis
Uses forward P/E, price-to-book, ROE, bond-equity spread, and 10-year percentile or z-score measures to judge market and sector valuation positioning.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- MXAPJCore benchmark index
- Strengths
- 12-month target 1080 implies about 24% upside from current 871; earnings upgrades are still ongoing, and RADaR indicates drawdown risk has decreased.
- Weaknesses
- Short-term performance is dragged by drawdowns in tech-heavy markets, position unwinds, momentum reversal, and foreign outflows.
- Comparison
- Singapore, Philippines and offshore China outperformed during the week, while Korea and Taiwan underperformed.
- Risks
- Continued foreign selling, hawkish FOMC stance, escalation of geopolitical risks, oil price volatility, and disappointing earnings disclosure.
- Korea equitiesKey constructive market
- Strengths
- Strong earnings growth, attractive valuation, and wider opportunities in AI hardware, semiconductors, industrials, governance reform, and re-inflation beneficiaries.
- Weaknesses
- Large weekly decline and significant foreign outflow.
- Comparison
- The report expects the opportunity set in the second half to expand from a few technology themes to a broader market.
- Risks
- Tech momentum reversal, foreign capital withdrawal, FX volatility, and earnings realization risk.
- Technology Hardware & SemiconductorsCore thematic sector
- Strengths
- AI infrastructure demand remains above supply, with persistent tightness in storage and adjacent supply chains and strong earnings revisions.
- Weaknesses
- Recent market leadership has been concentrated, creating sharper pullback risk when momentum reverses.
- Comparison
- Still has structural growth support relative to some traditional cyclical and materials sectors.
- Risks
- Crowded positioning, supply release, U.S. export controls, demand slowdown, and valuation drawdown.
- IndustrialsKorea and regional preferred theme
- Strengths
- Strong upward revisions in defense, shipbuilding, and construction, which may benefit from opportunity expansion.
- Weaknesses
- Sensitive to cyclical conditions and order sustainability.
- Comparison
- The report positions industrials as an important component of Korea’s broader opportunity set.
- Risks
- Global growth slowdown, weaker-than-expected order flow, and cost pressure.
- CommoditiesMacro cross-asset variable
- Strengths
- Gold forecasts still show 12-month upside, and oil is supported in the near term by geopolitical risk.
- Weaknesses
- The 12-month oil target is close to the current level, limiting further upside.
- Comparison
- Gold has a higher projected upside over 12 months than Brent’s 12-month change.
- Risks
- Changes in Middle East tensions, USD and real-rate volatility, and global demand shifts.
Key data
- MXAPJ weekly performanceabout -1.6% to -2%The report summary states MXAPJ declined 1.6%, while the headline phrasing says fell 2%.
- Weekly outperforming marketsSingapore +5%, Philippines +3%, China offshore +3%Singapore, Philippines and offshore China performed relatively better.
- Weekly underperforming marketsKorea -8%, Taiwan -3%, China A -1%Tech-heavy markets such as Korea and Taiwan pulled down the regional index.
- Foreign capital outflowEM Asia ex-China -US$6.5bn w/wMainly driven by Taiwan -US$5.9bn and Korea -US$2.3bn.
- Brent crudeUS$76/bbl, around +5%Middle East tensions pushed oil prices higher.
- MXAPJ 2026E earnings revision+4% since JuneUpward revisions were supported by Korea, Taiwan, Thailand and the industrials, information technology, and financial sectors.
- MXAPJ targetCurrent 871; 12m target 1080; change to target 24%From Goldman Sachs cross-asset forecast table.
- COMEX Gold forecastCurrent 4114; 12m 5115; 12m change 24%The commodity forecast still shows upside for gold.
- Brent crude forecastCurrent 75.5; 3m 83; 12m 75The three-month oil target is above current levels, while the 12-month target is close to current levels.
- Asian retail flowsYTD US$75bn inflowsThe report notes that Asian markets have received retail inflows year-to-date.
Impact & implications
For asset allocation, the report suggests investors should not fully rotate to defensive positions solely due to short-term tech and foreign-capital pressure. If earnings upgrades, tight AI demand-supply, and the expansion of Korean opportunities persist, medium-term support for the Asia Pacific ex-Japan market remains intact. In the near term, however, market risk requires monitoring foreign flows, geopolitical risk, oil prices, FOMC policy expectations, and volatility around the regional earnings disclosure season.
Risks
- Foreign outflows persist, especially in Taiwan and Korea.
- Overcrowded positioning, momentum reversal, and profit-taking in tech-heavy markets.
- Escalation of Middle East tensions pushing up oil and dampening risk appetite.
- A hawkish FOMC stance or renewed inflation pressure lifting interest rate expectations.
- Limited pace of Chinese policy easing with weak economic momentum potentially weighing on regional sentiment.
- Slowing Taiwan exports and weakening ASEAN demand may weigh on technology chain expectations.
- If earnings disclosures do not meet upward revision expectations, confidence in the ERLI signal could weaken.
What to watch
- Asian 2Q/1H2026 earnings season from mid-July to late August.
- China June exports, imports, trade balance, 2Q GDP, industrial production, fixed-asset investment, and retail sales.
- US CPI, retail sales, the FOMC meeting, and subsequent signals on the rate path.
- Korean BoK meeting, FX and liquidity changes after 24-hour onshore KRW trading, and exchange-rate movements.
- Whether foreign capital flows to Taiwan and Korea stabilize.
- Whether AI infrastructure supply tightness continues to spread into MLCC, electronic materials, wafers, and analog/power semiconductors.
- The impact of Brent crude, gold, USD, and Asian FX on risk assets.