Report Interpretation

Overview

This Asia-Pacific ex-Japan weekly strategy report combines market performance, earnings, flows, valuations and macro monitoring. Goldman Sachs is constructive on the regional earnings backdrop and its medium-term MXAPJ target, but notes that seasonality, foreign-flow divergence and major policy events could drive near-term volatility.

Core views

MXAPJ closed broadly flat ahead of Jackson Hole. Taiwan rose 2%, while Singapore and Australia each gained 0.5%; the Philippines fell 6%, Korea declined 4%, and Thailand dropped 2%. Materials, insurance and other financial services, and capital goods led sector performance, whereas consumer retail, autos and transportation lagged. The report links the Korea-Taiwan divergence to foreign flows: EM Asia ex-China saw US$2.5 billion of net outflows, driven by US$6.3 billion of Korea selling, partly offset by US$3.7 billion flowing into Taiwan. The August rebound was meaningful but does not remove the near-term seasonal concern. MXAPJ rose 3% in August, led by Korea, Taiwan and Singapore, yet July-August performance remained below historical third-quarter averages. Goldman Sachs' seasonal evidence points to weaker August-September returns before stronger October-January performance. It adds that US midterm-election uncertainty could amplify September weakness, although subsequent relief rallies have historically been stronger. Earnings were the report's central constructive fundamental signal. Of 985 reporting companies, representing 95% of MXAPJ market capitalization, CY2Q26 earnings increased 103% year-on-year and 43% quarter-on-quarter. Actual first-half earnings reached 50% of full-year estimates, in line with historical seasonality. Earnings surprises were broadly positive: 44% of companies beat consensus, 27% missed, and the median surprise was +3%. Singapore and Taiwan had the highest proportions of beats by market; energy, materials and information technology had the strongest beat rates by sector. Earnings-beat stocks outperformed historical patterns, while misses underperformed sharply; beat-related outperformance was especially strong in China/Hong Kong, Taiwan and India, while misses were punished more severely in Korea, Australia and Taiwan. Guidance added to the constructive interpretation. Regional guidance scores improved further during the reporting season, which Goldman Sachs views as supportive of a better growth outlook. Korea and China recorded the strongest guidance sentiment, whereas Indonesia was weakest. The report also notes sustained earnings upgrades through its ERLI indicator, although the pace of upgrades has moderated. Flows and index mechanics could create important near-term market effects. The FTSE GEIS semiannual review remains subject to revision through 4 September and is scheduled for implementation after the 18 September close. Goldman Sachs estimates more than US$15 billion of gross two-way APAC flows and approximately US$4.1 billion of net passive inflows, led by China, Taiwan and Korea. Separately, Korea leveraged ETF assets under management rebounded from a US$16 billion trough to US$24 billion after previously peaking at US$53 billion, taking leveraged exposure to 1.8% of market free float; the rebound was mainly due to asset returns rather than new demand, as the ETFs experienced moderate outflows since late July. Taiwan leveraged ETF assets remained near a record US$13 billion, equal to 0.7% of market free float, while recent profit-taking outflows totaled US$1 billion since the start of August. Goldman Sachs' published market allocation and targets express a positive medium-term regional view. MXAPJ is at 891 with a 12-month target of 1,080, implying 21% price appreciation and 24% total return. Korea is overweight with a KOSPI target of 12,000 from 6,789, implying 77% price change and 79% total return; Taiwan is overweight with a 51,000 target from 46,331, implying 10% price change and 13% total return. China A is overweight, while China, Hong Kong, India, Malaysia and Singapore are market weight; the Philippines, Thailand, Australia, Indonesia and several regional sectors are underweight. At sector level, the report is overweight capital goods, ex-Australia/China banks, health care, and technology hardware and semiconductors; it is underweight autos, consumer staples, software and services, transportation, internet, property and utilities. Valuation context is part of this allocation framework. MXAPJ traded at 10.9x forward-12-month P/E and 9.4x forward-24-month P/E, with corresponding 10-year z-scores of -2.1 and -2.4. Technology hardware and semiconductors traded at 8.6x and 7.2x respectively on the same forward P/E measures, while its forward valuation z-scores were -1.9 and -2.4. Goldman Sachs pairs these valuation measures with bottom-up consensus growth, revisions, return on equity and foreign flows rather than relying on a single metric. The macro backdrop is mixed across markets. In the United States, a wider-than-expected July trade deficit contrasted with stronger personal spending and durable-goods orders, which lifted third-quarter GDP estimates; the report also notes possible new semiconductor tariffs. China industrial profits and revenues increased year-on-year but fell sequentially. Taiwan industrial production exceeded expectations on strong technology output while retail sales softened, and India investment activity improved. On policy, the Bank of Korea delivered a preemptive dovish hike and raised its GDP forecast; the Bangko Sentral ng Pilipinas delivered a third consecutive rate hike amid persistent inflation overshoots; the Bank of Thailand held rates unchanged; and Goldman Sachs economists forecast a September Bank of Japan rate hike after Tokyo CPI met expectations.

Analysis framework

Goldman Sachs reviews regional equity performance and market breadth, then combines seasonal return comparisons, company-reported earnings versus consensus, guidance sentiment, earnings revisions, valuations, foreign and retail flows, leveraged ETF positioning, index-rebalance estimates and macro-policy indicators. Its scorecards use FactSet bottom-up consensus fundamentals and market data, while the published allocation table connects these inputs to market and sector positioning and 12-month index targets.

Methodology notes

• Industry AnalysisVolume-price decomposition

  Earnings, revenue growth and net-margin changes are reviewed by market and sector alongside price performance.

  The report separates operating growth and profitability from market returns to assess whether regional price moves are supported by reported fundamentals.

• Valuation methodsP/E and PEG Valuation

  Forward P/E, P/B, PEG and valuation z-scores versus 10-year ranges are used across markets and sectors.

  These measures place current equity prices relative to consensus earnings expectations and historical valuation ranges.

• Event-Driven and Behavioral FinanceFund-Flow and Positioning Analysis

  Foreign flows, passive rebalance flows, retail flows and leveraged ETF assets are tracked.

  The report uses positioning and fund-flow data to explain short-term differences between markets and identify potential trading effects around index rebalancing.

Asset mapping & comparison

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

• MXAPJ (MSCI AC Asia Pacific ex Japan)

  Primary regional equity benchmark and subject of Goldman Sachs' strategy outlook.

  Strengths

  Constructive earnings and guidance backdrop; target of 1,080 implies 21% price change and 24% total return.

  Weaknesses

  July-August performance remained below historical third-quarter averages.

  Comparison

  Taiwan and technology hardware led gains, while Korea weakened on foreign selling.

  Risks

  Seasonal September weakness, US midterm uncertainty, policy events and foreign-flow volatility.

• Korea / KOSPI

  Overweight market in the published allocation framework.

  Strengths

  Strongest guidance sentiment alongside China; KOSPI target of 12,000 versus 6,789.

  Weaknesses

  Fell 4% during the week and experienced US$6.3bn of foreign outflows.

  Comparison

  Foreign selling contrasted with US$3.7bn of inflows into Taiwan.

  Risks

  Leveraged ETF exposure equals 1.8% of market free float and earnings misses have seen pronounced underperformance.

• Taiwan / TWSE

  Overweight market and major technology-hardware beneficiary.

  Strengths

  Rose 2%; industrial production exceeded expectations on strong technology output; strong earnings-beat performance.

  Weaknesses

  Retail sales softened and leveraged ETF investors recorded profit-taking outflows.

  Comparison

  Outperformed Korea amid opposite foreign-flow patterns.

  Risks

  US$1bn of leveraged ETF outflows since the start of August; semiconductor tariff uncertainty.

• Technology Hardware & Semiconductors

  Overweight MXAPJ sector.

  Strengths

  High reported earnings growth and strong sector beat rates; forward P/E of 8.6x and 7.2x for forward-12-month and forward-24-month measures.

  Weaknesses

  Sensitive to tariff developments and technology-cycle expectations.

  Comparison

  Led regional gains with Taiwan; ranked above autos and software/services in Goldman Sachs' sector stance.

  Risks

  Potential new semiconductor tariffs and flow-driven volatility.

Key data

• MXAPJ August performance+3%Rebounded in August, but July-August returns remained below historical third-quarter averages.
• CY2Q26 MXAPJ earnings growth+103% year-on-year; +43% quarter-on-quarterBased on 985 reporting companies representing 95% of MXAPJ market capitalization.
• CY2Q26 earnings surprises44% beats; 27% misses; +3% median surpriseVersus consensus.
• First-half earnings progress50% of full-year estimatesIn line with historical seasonality.
• FTSE GEIS APAC rebalancing flows>US$15bn gross two-way; ~US$4.1bn net passive inflowsImplementation after the 18 September close; China, Taiwan and Korea expected to lead inflows.
• EM Asia ex-China weekly foreign flows-US$2.5bnKorea saw -US$6.3bn, partly offset by Taiwan at +US$3.7bn.
• MXAPJ valuation10.9x forward-12-month P/E; 9.4x forward-24-month P/E10-year z-scores of -2.1 and -2.4, respectively.
• MXAPJ target1,080 vs. 891 current level21% price change to target and 24% total return.

Impact & implications

Goldman Sachs interprets the combination of positive earnings surprises, improving guidance and below-history forward valuation measures as supportive of a constructive regional equity outlook. However, it expects market-level outcomes to remain uneven as seasonal weakness, US policy uncertainty, index-rebalance mechanics and sharply divergent foreign flows affect individual markets, especially Korea and Taiwan.

Risks

• Seasonal evidence suggests weak August-September returns before a stronger October-January period.
• US midterm-election uncertainty could amplify near-term September weakness.
• Potential new US semiconductor tariffs could affect the technology hardware and semiconductor backdrop.
• Korea and Taiwan leveraged ETF positioning and recent outflows could heighten market volatility.
• The FTSE GEIS review remains subject to revision until 4 September before implementation on 18 September.

What to watch

• Jackson Hole and subsequent global policy signals.
• FTSE GEIS review revisions through 4 September and implementation after the 18 September close.
• FOMC meeting on 15-16 September and Bank of Japan meeting on 18 September.
• Upcoming Asia activity, inflation, trade and PMI releases, including China PMIs, Korea trade and CPI, India GDP, and US payrolls.
• Whether earnings guidance remains strongest in Korea and China and whether Indonesia's weaker guidance persists.
• Foreign flows into Korea and Taiwan, plus leveraged ETF inflows or profit-taking outflows.