Goldman updates the Japanese low annual AGM approval-rate and unrealized real estate gains screens

Overview

This report is Goldman Sachs' Japan equity weekly note, focused on refreshing two Japanese stock screening frameworks: the low annual AGM approval-rate screen and the unrealized real estate gains-to-market-cap screen. It also covers TOPIX and Nikkei 225 period performance, sector strength and weakness, investor flows, buybacks, earnings revisions, and style and theme basket performance, and explains in the appendix the methodology for Goldman’s Japan liquid-stock thematic indices.

Core views

The report argues that governance pressure and asset revaluation remain observable themes in Japanese equities. The low annual AGM approval-rate screen focuses on liquid companies whose AGM approval rates in the 2026 annual meeting season are in the bottom decile, and this basket has performed strongly over the past 12 months. The unrealized real estate gains screen targets companies with large on-book unrealized property gains and where unrealized gains exceed 5% of market cap, with the number of constituents increasing versus the prior update. On flows, the latest week showed foreign investors and domestic institutions as net buyers, while retail investors were net sellers.

Analysis framework

The report uses a multi-dimensional framework including thematic screens, liquidity screens, equal-weight index performance, sector relative performance, fund flows, and earnings revisions. The key screens require sufficient trading liquidity and build portfolios around measurable or identifiable factors such as governance approval rates, real-estate latent gains, and shareholder return characteristics. The market dashboard evaluates the Japanese equity environment across price action, valuation, flows, earnings revisions, style, and sector dimensions.

Methodology notes

• Theme screenLow annual AGM approval-rate screen

  Liquid companies with low annual AGM approval rates in the bottom decile

  The universe is liquidity-based companies with six-month average daily turnover above USD10 million, and companies with latest 2026 AGM approval rates in the bottom 10% are selected.

• Theme screenUnrealized real estate gains screen

  Liquid companies with unrealized real estate gains above 5% of market cap

  The universe is companies with six-month average daily turnover above USD10 million, and unrealized real estate gains as a percentage of market cap must be above 5%.

• Market frameworkJapan liquid equities equal-weight index system

  Equal-weight sector, sub-sector, and thematic indices built from high-liquidity Japanese stocks

  The appendix states the overall stock pool consists of Japanese stocks with six-month average daily turnover above USD20 million, totaling 271 as of 2025-12-17. The index is refreshed annually, with constituents based on MSCI sector and sub-sector definitions, quant factors, and Goldman equity analyst inputs.

• Earnings momentumEarnings forecast revision index

  Difference between the number of upward revisions and downward revisions divided by total forecast count

  The earnings revision index equals the number of analyst upgrades in the past month minus the number of downgrades, divided by total forecast count.

Asset mapping & comparison

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

• TOPIX

  Core benchmark and strategy target vehicle for Japanese equities

  Strengths

  Goldman keeps 3/6/12 month targets of 4,100/4,200/4,400, leaving upside versus current levels for the 12-month target.

  Weaknesses

  Weekly short-term performance is -0.7%, still subject to market volatility, valuation, and earnings revisions.

  Comparison

  Relative to Nikkei 225's -1.7% this week, TOPIX declined less.

  Risks

  FX assumptions, earnings outlook, overseas flows, and shifts in global risk appetite could affect target achievement.

• Low annual AGM approval-rate screen

  Governance pressure and potential improvement thematic basket

  Strengths

  Equal-weight index up about 50% over 12 months; the 2026 bottom-decile approval-rate range was lower, reflecting elevated governance focus.

  Weaknesses

  Low approval may reflect genuine governance issues or operating pressure and does not necessarily lead to positive re-rating.

  Comparison

  The report states this basket performs better than the unrealized real estate gains screen.

  Risks

  If governance improvements fall short, shareholder action weakens, or fundamentals worsen, basket performance may retrace.

• Unrealized real estate gains screen

  Asset revaluation and hidden value-release thematic basket

  Strengths

  Constituent liquidity-based companies rose from 46 to 56, indicating a broader universe of firms with unrealized real-estate gains above 5% of market cap.

  Weaknesses

  Whether unrealized gains are realized depends on asset disposal, accounting recognition, management intent, and market conditions.

  Comparison

  Compared with the low annual AGM approval-rate screen, this theme is more centered on asset-value discovery than governance pressure.

  Risks

  Real estate pricing, trading liquidity, taxes, and capital allocation decisions may all limit value realization.

• Shareholder benefits and dividend basket

  Domestic retail shareholder return theme in Japan

  Strengths

  The long-short trade of dividend-plus-benefit basket versus no-benefit no-dividend basket is up 13% since June 3, 2026.

  Weaknesses

  The theme may be sensitive to domestic investor composition, policy preferences, and changes in payout policy.

  Comparison

  Unlike governance and real-estate screens, this basket emphasizes shareholder return format and market-defensiveness.

  Risks

  Style rotations, changes to shareholder benefit policy, or downward revisions in dividend expectations may weaken relative performance.

Key data

• TOPIX4,036.08, weekly change -0.7%As of 2026-07-10 15:30 JST.
• NK22568,557.73, weekly change -1.7%As of 2026-07-10 15:30 JST.
• TOPIX target3/6/12 months: 4,100/4,200/4,400Goldman strategy target.
• Low annual AGM approval-rate basket performanceUp about 50% over the past 12 monthsThe report says this equal-weight index is the better-performing basket among the two key screens.
• 2026 AGM bottom decile range56% to 81%Corresponding range in 2025 was 62% to 82%.
• Unrealized real estate gains screen countIncreased from 46 to 56 companiesIncludes 1 removal and 11 additions.
• Shareholder benefits and dividend long-shortUp 13% since 2026-06-03Long leg is companies that provide dividends and shareholder benefits; short leg is companies without either.
• Investor fund flowForeign investors +¥3,360bn, domestic institutions +¥1,970bn, retail investors -¥6,370bnTSE Prime cash stocks; week measured from 2026-06-29 to 2026-07-03.
• FX assumptionsFY26/FY27/FY28 USD/JPY assumptions are 157/154/150Exchange-rate assumptions used in Goldman’s top-down TOPIX earnings forecast.
• Sector performanceStrong sectors: Securities, Mining; Weak sectors: Glass ceramics, Nonferrous metalsHeadline summary.

Impact & implications

For investors, the report suggests that governance-related pressure, asset revaluation, and shareholder return characteristics remain viable thematic screens in Japanese equities. Companies with low annual AGM approval rates may face management-shareholder interactions, capital allocation changes, or governance improvement expectations; companies with high unrealized real estate gains may benefit from asset disposal, revaluation, or improved capital efficiency expectations. However, these screens are not stock-specific buy recommendations and still require liquidity, valuation, sector cycle, and company fundamental checks.

Risks

• The screen results in the report are stock universes based on themes and quantitative conditions and do not equal individual stock ratings or buy recommendations.
• Low annual AGM approval rates may correspond to governance flaws, management disputes, or operating pressure, and positive improvement is not guaranteed.
• Unrealized real estate gain potential may not be realized timely or fully, and may be affected by real estate prices and trading conditions.
• Liquidity screens cannot fully eliminate execution risk from market impact, securities lending constraints, or basket-trading mechanics.
• TOPIX targets rely on assumptions around earnings, FX, and risk appetite; if USD/JPY or global market conditions deviate from assumptions, index targets may not hold.

What to watch

• Subsequent governance improvements, capital allocation, and shareholder communication progress of 2026 low AGM approval-rate companies.
• Asset disposal, buybacks, dividends, or revaluation catalysts at companies with high unrealized real estate gains.
• Whether fund flow direction from foreign investors, domestic institutions, and retail investors in the TSE Prime market continues.
• TOPIX earnings revision index, sector ranking of earnings revisions, and FY2026/FY2027 earnings growth expectations.
• Whether relative performance of strong sectors (securities, mining) and weak sectors (glass ceramics, nonferrous metals) persists.
• Deviation of USD/JPY trajectory from FY26/FY27/FY28 assumptions of 157/154/150.