Goldman Sachs daily update: MXAPJ flat on the day, still up 20.2% year to date, with the 12-month target implying approximately 24% upside

Overview

This is a Goldman Sachs daily Asia-Pacific portfolio strategy update covering Asia ex-Japan equities, MSCI Japan, TOPIX, major Asian markets, industry sectors, fund flows, financial conditions, currencies, long-term yields, and 2026 earnings revisions. The report's core market message is that MXAPJ was flat on the day but gained 20.2% year to date; China and Singapore outperformed, while Korea and Japan underperformed; MSCI Japan fell 1.7% on the day.

Core views

The report's main message is that Asian equities remain in a strong year-to-date trend, but performance is highly divergent. Regionally, Korea and Taiwan are the main winners in 2026, while Indonesia, China, and India detracted from MXAPJ performance; by sector, information technology and industrials are the year-to-date leaders, while consumer discretionary and communication services led on the day. In valuation terms, Asian equities still trade at a substantial discount to the US and are broadly comparable with Europe, but appear expensive relative to bonds. Therefore, the sustainability of further gains will need to be assessed alongside earnings revisions, fund flows, and financial conditions.

Analysis framework

The report organizes its analysis around an index and regional strategy framework. It first reviews MXAPJ and Japanese market performance, then compares weekly, monthly, and year-to-date returns for major markets and sectors. It subsequently assesses valuation using 12-month forward P/E, trailing 12-month P/B, and the equity-bond yield gap, and finally cross-checks these factors against foreign and domestic fund flows, market breadth, strategy basket performance, financial conditions, currencies, long-term yields, and earnings revisions.

Methodology notes

• Valuation analysis12-month forward P/E and trailing 12-month P/B

  Use fPE and tPB to measure current index valuation levels, combined with target P/E and potential returns.

  The report lists current index levels, forward P/E, and P/B ratios for MXAPJ, MXCN, cs1300, TOPIX, and multiple Asian markets to compare regional valuations and the upside implied by Goldman Sachs targets.

• Relative valuationEquity-bond yield gap

  Compare the relative attractiveness of equity and bond yields.

  The report notes that the MXAPJ equity-bond yield gap is approximately 340bp, at -0.6 standard deviations, while the MXJP gap is approximately 150bp, at -1.9 standard deviations; both indicate that equities are expensive relative to bonds.

• Market momentumMarket and sector performance heatmap

  Observe market rotation through weekly, monthly, year-to-date, and correlation measures.

  The report compares the performance of major Asian markets and MXAPJ sectors and presents daily return correlations over the past five years to identify leaders, laggards, and diversification characteristics.

• Fund flowsFII and DII fund flows

  Observe the allocation direction of foreign and domestic institutional funds toward Asian equities.

  The report includes foreign flows into EM Asia ex-China and domestic institutional inflows in Asian markets to help assess regional liquidity support.

• Earnings expectations2026 earnings revisions

  Use upward or downward market and sector earnings revisions to measure fundamental momentum.

  The report presents 2026 earnings revisions for markets and sectors including MSCI Asia Pacific, MXAPJ, MSCI China, and MSCI Japan as a fundamental validation of valuation and price performance.

Asset mapping & comparison

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

• MXAPJ

  Core coverage index

  Strengths

  Up 20.2% year to date, with a Goldman Sachs 12-month target of 1080 points, approximately 24% above the current level of 868; Korea and Taiwan contributed significantly.

  Weaknesses

  Indonesia, China, and India detracted from year-to-date performance; the equity-bond yield gap of approximately 340bp indicates expensive valuation relative to bonds.

  Comparison

  Still trades at a substantial valuation discount to the US and is broadly comparable with Europe.

  Risks

  Limited valuation expansion, volatile fund flows, weakening earnings revisions, and divergent regional performance.

• MSCI Japan / MXJP / TOPIX

  Japanese equity market observation group

  Strengths

  The TOPIX 12-month target is 4400, implying approximately 10% potential upside from the current level of 4006.

  Weaknesses

  MSCI Japan fell 1.7% on the day; the MXJP equity-bond yield gap is approximately 150bp, at -1.9 standard deviations, indicating that equities are expensive relative to bonds.

  Comparison

  Japan underperformed China and Singapore on the day and also lagged the flat MXAPJ.

  Risks

  Expensive valuations, yen and interest-rate volatility, and short-term pressure on external-demand-related baskets.

• China and Singapore markets

  Markets that outperformed on the day

  Strengths

  The report states that China and Singapore outperformed the regional market on the day; Singapore's weekly performance in the table was 3.2%.

  Weaknesses

  China is still listed as one of the markets that detracted from MXAPJ's year-to-date performance.

  Comparison

  Stronger than Korea and Japan on the day.

  Risks

  Volatility in Chinese earnings revisions and policy expectations, and Singapore's sensitivity to valuation and interest rates.

• Korea and Taiwan markets

  Major contributing markets in 2026

  Strengths

  The report states that MXAPJ's year-to-date performance was driven primarily by Korea and Taiwan.

  Weaknesses

  Korea showed substantial underperformance in the monthly performance table, indicating short-term pullback pressure.

  Comparison

  Made a stronger year-to-date contribution than Indonesia, China, and India.

  Risks

  Technology cycles, foreign fund flows, currencies, and semiconductor-cycle volatility.

• Information technology and industrials sectors

  Leading sectors in 2026

  Strengths

  The report states that Info Tech and Industrials were the leading sectors in 2026.

  Weaknesses

  Industrials lagged on the day, indicating that short-term momentum may be volatile.

  Comparison

  Outperformed lagging sectors such as materials year to date.

  Risks

  Crowded valuations, disappointing earnings revisions, and volatility in global demand or supply chains.

• Strategy baskets

  Portfolio themes and trading observation tools

  Strengths

  AeJ Mutual Fund UW rose 12.3% on the day, while Rate-sensitives (AeJ) rose 14.0% weekly, indicating strong short-term performance in some strategy themes.

  Weaknesses

  JP Europe-exposed, JP Critical Tech, and APJ Environ.&Renewables baskets lagged on the day.

  Comparison

  Local consumption, AIGC applications, and dividend yield baskets performed well across different time horizons.

  Risks

  Basket trading is affected by market liquidity and stock-borrow constraints, and thematic performance may reverse quickly.

Key data

• MXAPJ daily performance0.0%The report states that the MXAPJ Index was flat on the day.
• MSCI Japan daily performance-1.7%The report states that MSCI Japan fell 1.7% on the day.
• MXAPJ year-to-date performance+20.2%The report states that MXAPJ rose 20.2% year to date in 2026 after gaining 27% in 2025.
• MXAPJ current level and valuation868; 12-month forward P/E 11.8x; trailing 12-month P/B 2.4xFrom the market valuation table.
• MXAPJ 12-month target1080 (+24%)Listed in Goldman Sachs' base-case target table.
• MXCN current level and valuation73; 12-month forward P/E 10.5x; trailing 12-month P/B 1.3xFrom the market valuation table.
• TOPIX current level and valuation4006; 12-month forward P/E 16.2x; trailing 12-month P/B 1.8xFrom the market valuation table.
• TOPIX 12-month target4400 (+10%)Listed in Goldman Sachs' base-case target table.
• MXAPJ equity-bond yield gapApproximately 340bp (-0.6 standard deviations)The report considers this an indication that equities are expensive relative to bonds.
• MXJP equity-bond yield gapApproximately 150bp (-1.9 standard deviations)The report considers this an indication that Japanese equities are expensive relative to bonds.
• Stronger markets on the dayChina, SingaporeThe report states that China and Singapore outperformed.
• Weaker markets on the dayKorea, JapanThe report states that Korea and Japan underperformed.
• Leading sectors on the dayConsumer discretionary, communication servicesThe report states that Cons Disc and Comm Serv led among MXAPJ sectors.
• Laggard sectors on the dayIndustrials, materialsThe report states that Industrials and Materials lagged.

Impact & implications

For portfolios, the report supports continued attention to existing winners and structurally strong sectors within Asia ex-Japan equities, but cautions against focusing solely on price momentum. Valuations that are expensive relative to bonds mean that subsequent returns will depend more heavily on continued earnings revisions, sustained fund flows, and stable financial conditions. If fund flows weaken, long-term yields rise, or earnings expectations are revised downward, the scope for further valuation expansion may be limited. The day's pullback in Japan and the low MXJP equity-bond yield gap also suggest that the short-term risk-reward profile of Japanese equities warrants a more cautious assessment.

Risks

• Asian equities are expensive relative to bonds; the MXAPJ and MXJP equity-bond yield gaps both indicate a narrowing risk-reward profile.
• Regional performance is highly divergent, with Korea, Japan, and some Japan-related strategy baskets under short-term pressure.
• Fund flows, market liquidity, and stock-borrow constraints may affect the tradability of strategy baskets.
• If earnings revisions weaken, support for current valuations and the upside implied by targets may diminish.
• Changes in currencies, long-term yields, and financial conditions may affect Asian equity returns.
• The report is strategy-themed research and does not constitute an independent recommendation on any single security.

What to watch

• Whether MXAPJ can maintain its strong year-to-date performance and move toward Goldman Sachs' 12-month target of 1080.
• Whether the leadership trend in Korea and Taiwan continues, and whether China, India, and Indonesia can reduce their drag.
• Whether rotation among consumer discretionary, communication services, information technology, and industrials persists.
• Whether FII and DII fund flows continue to support Asian equities.
• Whether the MXAPJ and MXJP equity-bond yield gaps narrow further or widen again.
• Whether 2026 earnings revisions continue to move upward at the market and sector levels.
• Performance of major Asian currencies against the US dollar, long-term yields, and changes in global financial conditions.