Goldman Sachs Boosts Asian Equities Outlook by 3%

Goldman Sachs has revised its outlook on Asian equities, citing a more favorable macroeconomic environment and increased certainty in tariff policies. The investment bank has raised its 12-month target price for the MSCI Asia Pacific ex-Japan Index by 3% to 700 points, implying a 9% return in dollar terms over the period. The strategists noted that the expected price-to-earnings ratio of 14 times for Asian equities is in line with the "fair value" as per their macro model, and earnings growth will be the primary driver of returns.

Goldman Sachs maintains its "overweight" stance on China, Japan, and South Korea equities, while downgrading Malaysia to "underweight," favoring the North Asian markets. The firm also upgraded its rating on Hong Kong equities to "market weight," citing the region as one of the primary beneficiaries of a weaker U.S. dollar due to the Federal Reserve's easing cycle. They also highlighted that the Philippines and China Taiwan equities are other markets that are highly sensitive and positively responsive to these factors.

The firm's bullish stance on Asian equities comes as the region's markets have shown strong performance. The Shanghai Composite Index has risen over 8% year-to-date, with the index recently surpassing 3,500 points for the first time since November 2024. Goldman Sachs also expects Chinese onshore and offshore listed companies to distribute a total of 300 billion yuan in dividends by the end of 2025, marking a historic high.

In a report titled "Playing the Cash Symphony in China," Goldman Sachs noted that the low-interest-rate environment will attract more investors to Chinese equities, as companies increase their dividend payouts and share buybacks, potentially driving up valuations. The firm also expects foreign capital inflows into Asian markets to increase in the second half of the year, driven by improving corporate earnings and a more favorable policy environment.

Other analysts have also expressed optimism about Asian equities. A prominent U.S. research brokerage firm recently stated that it is bullish on the region's stock markets for the second half of the year, citing increased foreign capital inflows, improving corporate earnings, and a more accommodative policy environment. The firm is particularly bullish on South Korea and India equities.

Standard Chartered Bank's Wealth Management division also recently released its "2025 Global Market Outlook," noting that global central bank easing, a soft landing for the U.S. economy, and a weaker U.S. dollar will all benefit risk assets. The bank maintains its overweight position on Asian (excluding Japan) equities and is bullish on the technology, communication services, and discretionary consumption sectors in China.