Goldman raises MXAPJ target to 920, with Korean earnings upgrades as the core driver

Overview

This is a Goldman Sachs weekly strategy report on Asia Pacific ex-Japan equities. The core view is that MXAPJ has moved higher further, supported by easing Middle East conflict, strength in North Asian markets, semiconductor earnings upgrades, and foreign inflows. Goldman raised regional earnings forecasts and the MXAPJ index target, viewing Korea and Taiwan, China as the main sources of this round of upgrades, while also warning that energy shocks, margin pressure in domestic-demand sectors, and slower growth in some ASEAN markets still warrant caution.

Core views

The report's core views include: first, significant earnings upgrades in Korea and Taiwan, China, lifting the MXAPJ 2026 EPS growth forecast to 45%; second, Korea has the most prominent earnings elasticity in the region due to the upcycle in memory and expectations for corporate-governance reform; third, the MXAPJ target has been raised to 920, reflecting earnings improvement, while the target P/E has been lowered to 13.2x, indicating valuation assumptions have not been aggressively expanded; fourth, growth style and AI-related technology hardware and semiconductors remain the structural main theme; fifth, India's and ASEAN's domestic-demand industries face pressure on macro conditions and corporate margins from energy shocks.

Analysis framework

The report forms its view by combining top-down regional index targets, market allocation, EPS revisions, fund flows, valuation ranges, risk indicators, and event calendars; it also uses bottom-up consensus data from FactSet, I/B/E/S, and MSCI to compare earnings revisions, valuations, foreign inflows, and style-factor performance across markets.

Methodology notes

• Earnings forecasts and index targetsMXAPJ EPS and target index path

  Use regional earnings forecasts, target P/E, and index path to derive MXAPJ 3-month, 6-month, and 12-month targets.

  Goldman incorporated stronger 2026-2027 EPS expectations into the model, raising its 2027 EPS forecast by about 17%, while using a lower target P/E of 13.2x to lift the MXAPJ 12-month target to 920 and raise the 3-month and 6-month path to 830/870.

• Growth stock screeningRule of 10

  Screen for long-term growth stocks with realized and expected sales growth at or above 10%.

  The report applies the US strategy team's Rule of 10 framework to Asia, screening 50 GS Buy-rated companies that require actual and expected annual sales growth of at least 10% during 2024-2028, in order to identify structural growth opportunities amid moderate growth and declining rates.

• Fund flows and sentimentFII and retail sentiment tracking

  Track net foreign buying, Southbound flows, active and passive fund flows, and retail sentiment indicators.

  The report uses exchange-level foreign-flow data and fund-flow data to assess liquidity support. This week, EM Asia ex-China saw net foreign buying of about US$4.4bn, mainly from Taiwan, China; retail funds in Korea and Taiwan, China recorded net selling for the week.

• Valuation and styleForward P/E, P/B, ROE, and style backtesting

  Assess regional valuations using historical ranges, the spread between earnings yield and bond yields, and the relationship between P/B and ROE, while using factor-group backtests to observe style performance.

  The report compares current MXAPJ and individual market valuations with their 10-year ranges and tracks the performance of style portfolios such as growth and value, emphasizing that AI demand is driving valuation gains in technology hardware and semiconductor-related growth stocks.

Asset mapping & comparison

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

• MXAPJ

  Core regional index and target-upgrade object

  Strengths

  Earnings forecasts have been revised up significantly, foreign inflows have improved, and North Asian markets are leading; the 12-month target has been raised from 870 to 920.

  Weaknesses

  Some markets and domestic-demand sectors are still affected by energy shocks, macro slowdown, and margin pressure.

  Comparison

  Compared with global and other Asian markets, MXAPJ rose 2.8% this week and has shown strong relative momentum year to date.

  Risks

  If the earnings upgrades in Korea and Taiwan, China fail to materialize, or if geopolitics and energy prices deteriorate again, upside for the index may be limited.

• Korean equities

  Largest source of regional earnings upgrades and overweight allocation

  Strengths

  The 2026 EPS growth forecast has been raised to 220%, clearly driven by the memory cycle and AI-related semiconductor upgrades, while corporate-governance reform and improved shareholder returns offer potential valuation re-rating.

  Weaknesses

  Progress in governance reform is relatively gradual, so value realization may be delayed; there were still signs of foreign and retail selling this week.

  Comparison

  The magnitude of Korea's earnings upgrades and expected growth is the most prominent among Asian markets; the report's charts show its 2026E EPS growth at a historical high.

  Risks

  Semiconductor-cycle volatility, corporate-governance reform falling short of expectations, and volatile fund flows.

• Taiwan, China equities

  Important source of tech-chain earnings upgrades and foreign inflows

  Strengths

  The 2026 EPS growth forecast has been raised to 34%, first-quarter sales and export data are solid, and foreign inflows reached about US$5.1bn for the week.

  Weaknesses

  Valuations have already moved up on AI demand and expectations for technology hardware, making the market sensitive to earnings delivery.

  Comparison

  The market rose about 4% this week, outperforming most of the region and second only to Korea.

  Risks

  Fluctuations in AI demand, semiconductor order cycles, and reversals in foreign inflows.

• China equities and China A-shares

  Listed as overweight or relatively positive in regional allocation

  Strengths

  China's first-quarter GDP and March industrial production beat expectations, the decline in property prices narrowed, and the market rose about 2-3% this week.

  Weaknesses

  Monetary and credit data were disappointing, and the recovery in domestic demand remains uneven.

  Comparison

  China performed better than China, Hong Kong and ranked ahead of some ASEAN markets in regional allocation.

  Risks

  Insufficient policy follow-through, unstable property recovery, and weak credit expansion.

• India and ASEAN domestic-demand sectors

  Regions and sectors on which the report explicitly remains cautious

  Strengths

  Some markets still have structural growth and long-term consumption potential.

  Weaknesses

  Energy shocks may weigh on macro conditions and corporate margins, and Malaysia's slower first-quarter GDP growth points to growth pressure.

  Comparison

  Compared with Korea and Taiwan, China, India and ASEAN have weaker earnings-upgrade momentum, and some markets such as Thailand and the Philippines underperformed this week.

  Risks

  Rising oil and energy costs, slower consumption, and monetary and policy pressure.

• Asian Rule of 10 growth stocks

  Structural growth screening basket

  Strengths

  They have outperformed MXAPJ by about 70 percentage points since 2025, supported by AI demand and long-term growth in technology hardware and semiconductors.

  Weaknesses

  Valuations have already risen, and the group requires high confidence in the sustainability of long-term sales growth.

  Comparison

  Against a backdrop of moderate growth and declining bond yields, the report prefers growth stocks over value stocks.

  Risks

  Valuation compression, slower AI capex, and sales growth falling below the 10% screening threshold.

Key data

• MXAPJ performance this week+2.8%Korea about +6%, Taiwan, China about +4%, and China about +2-3% led gains; China, Hong Kong about -3%, and Thailand and the Philippines about -2% lagged.
• Current MXAPJ index level815The current MXAPJ index level disclosed in the report's market/sector scorecard.
• MXAPJ 12-month target920Raised from 870 to 920, implying about 13% USD price upside.
• MXAPJ 3-month/6-month path830/870Goldman also raised the short- and medium-term index path, mainly driven by upward earnings revisions.
• MXAPJ 2026 EPS growth forecast+45%The previous forecast was +29%.
• Korea 2026 EPS growth forecast+220%Previously +130%, an extremely high level in Asian market history excluding the abnormal rebound period after the 1999 Asian financial crisis.
• Taiwan, China 2026 EPS growth forecast+34%Previously +28%, supported by first-quarter sales and export data.
• 2027 EPS forecast revision+17%Supports the upward revision to the regional index target.
• EM Asia foreign inflowsUS$4.4bnNet foreign inflows for the week, mainly driven by about US$5.1bn of inflows into Taiwan, China; Korea saw about US$0.6bn of net outflows.
• Year-to-date retail funds in Asian marketsUS$26bn inflowBut Korea saw about US$2.3bn and Taiwan, China about US$3.8bn of retail net selling this week.

Impact & implications

The investment implication of the report is that short-term risk appetite and earnings revisions support continued gains in Asia Pacific ex-Japan equities, with the North Asia tech chain, Korea's earnings cycle, and Taiwan, China semiconductors remaining the main incremental sources; however, valuation upgrades are not unlimited, and the lower target P/E means Goldman is relying more on earnings delivery than on valuation expansion. At the portfolio level, investors should focus more on upward earnings revisions, AI semiconductors, foreign inflows, and corporate-governance improvements, while controlling for energy shocks, policy events, and margin pressure in domestic-demand sectors.

Risks

• A renewed deterioration in the Middle East conflict or energy prices could hit Asian macro conditions and corporate margins.
• If semiconductor earnings upgrades in Korea and Taiwan, China fail to materialize, the core basis for the higher MXAPJ target would be weakened.
• India's and ASEAN's domestic-demand sectors face energy shocks and slowing growth, and earnings revisions may remain under pressure.
• The improvement in fund flows could still reverse; net foreign selling in Korea this week and net retail selling in Taiwan, China and Korea indicate sentiment is not improving in a one-way fashion.
• China's monetary and credit data came in below expectations, and insufficient credit recovery could weigh on the performance of China-related assets.
• Growth stocks and AI-related technology hardware valuations have already risen, and valuation sensitivity is high if rates or growth expectations reverse.
• Key policy and central-bank events including the BOJ meeting, FOMC meeting, China's Politburo economic policy meeting, and the G7 summit could trigger market volatility.

What to watch

• Whether subsequent earnings revisions in Korea and Taiwan, China continue to move higher, especially in memory, semiconductors, and the AI hardware chain.
• The CY1Q26 earnings season runs from mid-April to mid-May, and investors need to watch earnings delivery and management guidance.
• Whether MXAPJ can track the 3-month and 6-month path of 830/870 and move closer to the 12-month target of 920.
• Whether EM Asia foreign inflows continue, especially whether inflows into Taiwan, China and outflows from Korea improve.
• China's macro data, property prices, monetary credit, and signals from the Politburo economic policy meeting.
• The impact of energy prices and the Middle East situation on margins in India, ASEAN, and domestic-demand industries.
• The sustainability of sales growth, valuation changes, and relative performance versus MXAPJ of Asian Rule of 10 growth stocks.
• The impact of the BOJ, the FOMC, and regional elections on rates, FX, and risk appetite.