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

Overview

This is a Goldman Sachs update on Asian strategy baskets, with the core goal of helping investors capture earnings revisions, the capex boom, and long-term structural winners in Asian markets through tradable or trackable equity baskets. The report covers macro slices, geographic revenue exposure, style factors, investor positioning, and thematic baskets, and provides preferred allocation directions for 2H 2026.

Core views

The report argues that in an environment of still-high inflation, a hawkish Fed, possible continued tightening by Asian central banks, and soft local demand, investors should favor GARP with both valuation discipline and growth, cyclical stocks with global revenue exposure, and banks and rate-sensitive financials supported by capital markets activity and wealth effects. In style terms, earnings revision winners and strong earnings revision baskets should continue to perform well; in asset structure terms, capital-intensive, low-displacement-risk companies are preferred over asset-light companies. Thematically, AI infrastructure, semiconductors, edge AI, nuclear and renewable energy, core power, the space economy, US reindustrialization, and defense supply chains are viewed as the main structural opportunities.

Analysis framework

The report uses equity baskets as the unit of analysis, breaking down the Asian equity market by macro drivers, revenue sources, style factors, positioning preferences, and thematic logic. Each basket screens constituents using indicators such as market capitalization, liquidity, revenue exposure, valuation, earnings growth, earnings revisions, balance sheets, margins, tax rates, labor costs, capital expenditure, or thematic exposure, and expresses strategy views through relative basket performance.

Methodology notes

• Macro allocationMacro slices

  Asian equities are divided into six categories by fundamental revenue and earnings drivers: global cyclicals, commodity cyclicals, domestic cyclicals, rate-sensitive financials, asset-sensitive financials, and defensives.

  Macro slice baskets consist of 40 large-cap stocks from MXASJ, with a 10% cap on single-stock weight, and are used to observe Asian equity performance under different macro drivers.

• Geographic allocationGeographic revenue exposure baskets

  Exposure baskets are built based on company revenue sources, including the US, US exports, Europe, China, international, and domestic consumption.

  Geographic baskets typically select 40 or 50 APxJ stocks based on latest disclosed revenue exposure, free-float market cap, and liquidity, and weight them by free-float market cap multiplied by geographic revenue exposure, with a 10% single-stock cap.

• Style factorsStyle, factor, and fundamental baskets

  Baskets are constructed using factors such as growth, value, GARP, stable growth, dividend, momentum, earnings revisions, balance sheet, margins, Sharpe ratio, tax rate, labor cost, capital intensity, and capital expenditure.

  Most style baskets consist of 50 stocks and are regionally close to MXAPJ; except for capital-intensive vs. asset-light and high capex and R&D baskets, most are equal-weight and market-neutral baskets.

• Thematic investingThematic baskets

  Structural winners are identified around AI, Power Up Asia, defense, the space economy, US reindustrialization, and regional policy themes.

  Thematic baskets are used to express medium- to long-term industry trends and policy-supported directions, with the report highlighting AI infrastructure, semiconductors, edge AI, nuclear power, renewable energy, power, defense, and the space economy.

• Positioning and sentimentInvestor positioning baskets

  Market crowding is observed through baskets reflecting mutual fund overweight/underweight positions, consensus buys/sells, VIP, shorts, and retail preferences.

  Positioning baskets are used to identify investor preferences and potential contrarian opportunities, though the report notes that tradability depends on market liquidity and stock borrow constraints.

Asset mapping & comparison

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

• GARP (GSSZGARP), global cyclicals (GSSZMSGC), and rate-sensitive financials (GSSZMSFR)

  Core preferred baskets

  Strengths

  Benefit from a balance of growth and valuation, global revenue exposure, capital markets activity, and positive wealth effects.

  Weaknesses

  Sensitive to the interest-rate path, global demand, and financial market activity.

  Comparison

  Preferred by the report over domestic cyclicals (GSSZMSDC) and domestic consumption (GSSZDOMC).

  Risks

  Performance could come under pressure if inflation does not fall as expected, rate hikes drag on risk appetite, or global demand weakens.

• Capital-intensive (GSSZHALO) vs. asset-light (GSSZLAHO)

  Relative long-short view

  Strengths

  Capital-intensive companies have larger asset bases, business exposure with low displacement risk, and support from geopolitics and energy security investment.

  Weaknesses

  The capital-intensive segment may require sustained investment, with slower realization of returns on capital.

  Comparison

  The report believes asset-light companies may lag because of higher AI disruption risk.

  Risks

  The relative view could weaken if the capex cycle slows, project returns disappoint, or AI impact is lower than expected.

• Earnings revision winners (GSSZREVW) and strong earnings revisions (GSSZSERV)

  Earnings momentum allocation

  Strengths

  Consensus revision factors have performed strongly year to date, and the report believes they can contribute alpha across cycles.

  Weaknesses

  Dependent on analyst expectations and target-price changes, and may be affected by crowded expectations or rapid reversals.

  Comparison

  Preferred over earnings revision losers (GSSZREVL) and weak earnings revisions (GSSZWERV).

  Risks

  Momentum gains could retrace if the spread of earnings upgrades slows or the market prices them in early.

• AI infrastructure, AIGC Hardware (GSSZAIHW), Semis (GSSZAISM), and Taiwan Apple Suppliers (GSSZAPPL)

  Structural beneficiary themes

  Strengths

  Supported by upward revisions to global AI and server demand, a longer memory cycle, agentic AI-driven compute demand, and specification upgrades.

  Weaknesses

  Theme valuations and supply-chain expectations may already be elevated, and some names are sensitive to a single customer or hardware cycle.

  Comparison

  The report prefers infrastructure and semiconductor hardware beneficiary chains, while also watching edge AI beneficiaries.

  Risks

  Compute demand below expectations, an inventory cycle reversal, supply-chain constraints, or slower customer capex.

• Power Up Asia: nuclear power (GSSZNUCL), renewable energy (GSSZEVMT), and power (GSSZPOWE)

  Themes benefiting from AI compute and energy security

  Strengths

  Rising AI computing demand and greater awareness of energy security support power-related stocks; nuclear offers clean baseload, renewables are supported by China’s anti-involution policy, and power and utilities provide stable earnings and attractive valuations.

  Weaknesses

  There is uncertainty around policy execution, on-grid tariffs, project approvals, and returns on capex.

  Comparison

  The report views nuclear as a strategic direction, renewables as a tactical opportunity, and core power as a stable holding.

  Risks

  Policy changes, weaker-than-expected power demand, rising costs, or failed valuation recovery.

• Asia space economy (GSSZSPCE)

  Structural growth theme

  Strengths

  The report sees attractive relative risk-reward, supported by structural demand, measurable earnings delivery, policy support, and under-allocation by thematic capital.

  Weaknesses

  Commercialization timing and earnings realization across the value chain may be uneven.

  Comparison

  Compared with traditional cyclical themes, the space economy depends more on long-term policy and technology demand.

  Risks

  Order delays, weaker policy support, budget volatility, or failure of thematic capital to flow in.

• Aerospace & defense (GSSZADEF) and non-core defense suppliers (GSSZDEFS)

  Geopolitics and defense spending theme

  Strengths

  Geopolitical risks and higher defense spending support demand, with the report saying order books remain intact and recent underperformance may offer a better entry point.

  Weaknesses

  The theme is affected by government budgets, order timing, and market willingness to rerate.

  Comparison

  The report sees a potential mismatch between recent weak performance and resilient underlying order fundamentals.

  Risks

  Geopolitical easing, defense budget adjustments, project delays, or failure of valuation rerating to materialize.

• US reindustrialization (GSXAUSRE)

  Supply chain and manufacturing security theme

  Strengths

  Strategic competition between China and the US is driving demand for domestic manufacturing, supply-chain resilience, and economic security, which may benefit Asian supply-chain companies.

  Weaknesses

  Affected by trade policy, capacity relocation costs, and customer geographic footprints.

  Comparison

  Compared with pure US sales exposure, this theme emphasizes Asian companies embedded in US supply chains.

  Risks

  Tariffs, export controls, escalating geopolitical friction, or customers reconfiguring supply chains.

Key data

• Rebalancing scope59 strategy basketsCovering macro slices, geographic exposure, style factors, positioning, and thematic baskets.
• Number of style and factor baskets25The report says this update rebalances all 25 style and factor baskets.
• Performance of earnings revision winnersGSSZREVW vs. GSSZREVL ahead by 57 percentage points year to dateThe report views the dynamic consensus revision factor as a cross-cycle alpha source.
• Strong vs. weak earnings revision performanceGSSZSERV vs. GSSZWERV ahead by 36 percentage points year to dateReflecting the relative performance of positive vs. negative 12-month forward earnings revisions.
• Macro slice basket compositionEach basket contains 40 MXASJ large-cap stocks, with a 10% cap on single-stock weightStocks are assigned to different macro slices based on GICS sectors and fundamental drivers.
• Number of geographic exposure baskets6Covering revenue sources such as US sales, US exports, Europe sales, China sales, international sales, and domestic consumption.
• Geographic exposure screening thresholdsFree-float market cap > US$1bn, 6-month average daily turnover > US$5mnBaskets are ranked by latest revenue exposure and subject to weight caps.
• Reference regional composition for style baskets24% offshore China, 12% China A-shares, 24% Taiwan, 20% South Korea, 12% Australia and New Zealand, 4% Hong Kong, China, 4% SingaporeMost style baskets adopt a regional composition similar to MXAPJ; India and emerging ASEAN markets are excluded due to tradability and shortability constraints.
• AI thematic viewContinue to favor AI infrastructure, AIGC Hardware, Semis, and Taiwan Apple SuppliersSupporting factors include upward revisions to global AI and general server forecasts, a longer memory cycle, and agentic AI driving compute demand.
• Tracking platformsBloomberg <GSSA>; GS MarqueeThe report states the baskets can be tracked in real time on Bloomberg and GS Marquee.

Impact & implications

For portfolios, the report recommends shifting from single-industry calls to auditable basket allocations: under macro uncertainty and weak domestic demand, prioritize GARP, global cyclicals, and rate-sensitive financials with reasonable valuations and verifiable earnings growth; for long-term themes, look for Asian beneficiaries of AI compute, power supply, energy security, defense, the space economy, and US supply-chain reindustrialization. Investors also need to manage risks related to liquidity, stock borrow, valuation rerating, and backtest failure.

Risks

• The report explicitly notes that basket tradability depends on market conditions, including liquidity and stock borrow constraints.
• Historical performance and backtests do not represent future results.
• A hawkish Fed, continued rate hikes by Asian central banks, and elevated inflation may suppress valuations and risk appetite.
• Soft regional domestic demand may drag on domestic cyclical and consumption-related baskets.
• Asset-light companies face higher AI disruption risk, but capital-intensive companies also face uncertainty over capex returns.
• Themes such as AI, nuclear power, renewable energy, defense, and the space economy depend on policy, orders, technology demand, and valuation rerating.
• Thematic flows and investor positioning may cause crowded trades or contrarian volatility.

What to watch

• The Fed and Asian central bank rate paths, inflation trends, and the recovery of regional domestic demand.
• The persistence of earnings revision baskets such as GSSZREVW vs. GSSZREVL and GSSZSERV vs. GSSZWERV.
• Whether global AI, general server, memory, and agentic AI compute demand continues to be revised upward.
• Policy support, project approvals, and earnings stability for nuclear power, renewable energy, and electric utilities.
• Defense and space economy order books, budget changes, and whether the market rerates them.
• Delivery of policy themes in China around AI, the 15th Five-Year Plan, shareholder returns, overseas expansion, and targeted growth.
• Progress in South Korea’s corporate governance reform, value-up program, preferred shares, and holding-company discount changes.
• Progress in Japan’s economic security, critical minerals, defense, low AGM approval rates, and cross-shareholding reforms.
• Advancement of India’s energy security and defense self-reliance policies.
• Real-time basket performance, constituent changes, and liquidity on Bloomberg <GSSA> and GS Marquee.