ERLI points to the continuation of the Asia-Pacific earnings upgrade cycle, but at a slower pace
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ERLI points to the continuation of the Asia-Pacific earnings upgrade cycle, but at a slower pace
Goldman Sachs' ERLI model expects MXAPJ earnings revisions to remain tilted to the upside, with Tech H/W, Korea, and Taiwan continuing to lead, while India and ASEAN face greater earnings downgrade pressure.
- Technology and U.S. manufacturing activity remain strong, but momentum has slowed, supporting continued consensus earnings upgrades.
- TrendForce is more optimistic on second-quarter memory prices, and combined with triple-digit memory export growth, Korea's earnings upgrade momentum is expected to remain strong.
- Taiwan is supported by double-digit year-over-year growth in technology sales and continued manufacturing expansion, keeping earnings revisions resilient.
- India was downgraded to market weight as manufacturing PMI fell to a 4-year low, cost pressures rose, and vulnerability to oil supply shocks increased.
- This month the long sectors are Tech H/W, Energy, Industrials, and Materials; the short sectors are Consumer Staples, Utilities, Real Estate, and Consumer Discretionary.
Report interpretation
Overview
This report is Goldman Sachs' Asia-Pacific strategy team's April 2026 pulse check on the Earnings Revisions Leading Indicator (ERLI). The core view is that the earnings upgrade cycle in Asia-Pacific ex Japan (MXAPJ) will continue, but at a slower pace than before. Drivers include technology demand, memory prices, manufacturing activity, commodity prices, bond yields, and the differentiated impact of oil supply shocks across markets.
Core views
The report argues that the strongest earnings upgrades are concentrated in Korea, Taiwan, and Tech H/W. Korea is supported by higher memory prices and triple-digit growth in memory exports, while Taiwan benefits from double-digit year-over-year growth in technology sales and continued manufacturing expansion. Australia may see better earnings revisions on the back of stronger commodity prices and higher bond yields. China's earnings revisions may remain resilient because manufacturing activity is expanding and the economic impact of oil supply shocks is more contained. In contrast, India and ASEAN may face weaker earnings revisions due to softer manufacturing PMIs, rising cost pressures, and greater sensitivity to oil supply shocks.
Analysis framework
The report uses the ERLI framework to forecast the direction of the three-month revision in next-twelve-month (NTM) EPS over the next 2 months, and it groups earnings revision strength into buckets by sector and market. For strategy application, the report builds long/short screens: go long stocks rated Buy by GS and in the top four ERLI buckets, and short stocks rated Sell by GS or with negative earnings revisions that fall into the bottom four buckets.
Methodology notes
Use macro, industry, price, and activity indicators to forecast future earnings revisions.
ERLI is used to forecast the three-month revision in NTM EPS for Asia-Pacific markets, with a focus on indicators such as technology, manufacturing, commodities, rates, and oil price shocks, and to classify markets and sectors into buckets with stronger or weaker earnings upgrades or downgrades.
Select sector and stock portfolios based on forecast earnings revision strength.
Top 4 refers to the four buckets with the highest average forecast three-month NTM EPS revisions over the next 2 months, while Bottom 4 refers to the four lowest buckets; the report combines these with GS stock ratings for long/short stock selection.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Tech H/WLong sector
- Strengths
- Strong support from technology demand and memory prices, with the clearest expected earnings upgrades.
- Weaknesses
- The overall pace of upgrades is slowing; if technology sales or memory prices fall short of expectations, momentum could weaken.
- Comparison
- Has an earnings revision advantage versus weaker sectors such as Consumer Discretionary, Real Estate, and Utilities.
- Risks
- A downturn in the technology cycle, memory prices coming in below expectations, or slower manufacturing activity.
- South KoreaLeading market for earnings upgrades
- Strengths
- Higher memory prices and triple-digit growth in memory exports are supporting earnings upgrades.
- Weaknesses
- High dependence on the tech hardware and memory cycles.
- Comparison
- Expected to have the strongest earnings revisions in the MXAPJ market.
- Risks
- A pullback in memory prices, weaker export momentum, and slower global technology demand.
- TaiwanLeading market for earnings upgrades
- Strengths
- Double-digit year-over-year growth in technology sales and continued manufacturing expansion.
- Weaknesses
- Manufacturing expansion has slowed versus last month.
- Comparison
- Still better positioned than markets such as India and ASEAN, where earnings downgrade pressure is greater.
- Risks
- Slower technology sales and weakening manufacturing PMIs.
- IndiaDowngraded to market weight
- Strengths
- The report does not highlight any clear near-term advantage.
- Weaknesses
- Manufacturing PMI fell to a 4-year low, cost pressures are rising, and the market is more vulnerable to oil supply shocks.
- Comparison
- The earnings revision outlook is weaker than in Korea, Taiwan, and China.
- Risks
- Oil price or supply shocks, cost pressures, and continued weakness in manufacturing activity.
- ASEANMarket with weaker earnings revisions
- Strengths
- The report does not highlight any clear near-term advantage.
- Weaknesses
- Manufacturing PMIs are weak, especially in Indonesia, and growth sensitivity to oil supply shocks is more negative.
- Comparison
- Along with India, this is one of the regions in the report facing greater earnings revision pressure.
- Risks
- Further manufacturing slowdown, oil supply shocks, and worsening growth sensitivity.
Key data
- Long sectors this monthTech H/W, Energy, Industrials, MaterialsBased on the latest ERLI forecast.
- Short sectors this monthConsumer Staples, Utilities, Real Estate, Consumer DiscretionaryBased on the latest ERLI forecast.
- Strategy performance over the past monthLong GS Buy stocks fell 5.8%, short GS Sell stocks fell 3.7%, alpha was -2.1%Since March 5, 2026.
- Cumulative alpha since ERLI inception+146.2%Based on total return since ERLI was launched in April 2017.
- 2026 year-to-date alpha+9.7%2026 YTD performance disclosed in the report.
- India rating actiondowngraded India to market weightDue to manufacturing PMI falling to a 4-year low, rising cost pressures, and greater vulnerability to oil supply shocks.
Impact & implications
The investment implication is that the Asia-Pacific earnings revision trade can continue to center on tech hardware, Korea, and Taiwan, but expectations should be lowered for the pace of earnings upgrades, and earnings downgrade risk in India and ASEAN should be monitored closely. On sector allocation, the report recommends combining ERLI strength buckets with GS ratings for long/short selection rather than interpreting the conclusion as an isolated recommendation on a single security.
Risks
- ERLI forecasts may deviate from actual earnings revisions.
- If technology demand, memory prices, or manufacturing activity are weaker than expected, the earnings upgrade logic for Korea, Taiwan, and Tech H/W will weaken.
- Oil supply shocks could further weigh on growth and earnings revisions in India and ASEAN.
- The long/short strategy posted -2.1% alpha over the past month, indicating that short-term trading performance may be volatile.
- This report is based on public information and model forecasts, and its views may change as data are updated.
What to watch
- TrendForce's follow-up forecast for second-quarter memory prices.
- Whether Korea's memory export growth continues at triple-digit rates.
- Year-over-year growth in Taiwan technology sales and changes in manufacturing activity.
- The impact of India's manufacturing PMI, cost pressures, and oil price shocks.
- ASEAN manufacturing PMIs, especially Indonesia.
- The gap between ERLI forecasts for Apr-26 and May-26 and actual MXAPJ NTM EPS three-month revisions.