Goldman Sachs is positive on a number of Asian markets right now, despite what it expects to be a “subdued” third quarter of the year. Sunil Koul, the bank’s vice president of Asia Pacific portfolio strategy, said he expects a “moderate” return of 11% for Asian stocks this year, with muted returns this quarter before a recovery in the final three months. He told CNBC’s “Street Signs Asia” last week that he’s positive on Japan, Korea and China in particular. Japan stocks have rallied strongly this year — with the Nikkei 225 up about 30% so far and outpacing U.S. equities — and Koul says there’s still further to go. Goldman expects 24% earnings-per-share growth over the next three years, driving its prediction that Japan’s Topix index will reach 2,500, a nearly 8% increase from Monday’s close. Goldman is also overweight on China for the moment, given it expects a tactical recovery for the country’s economy given further policy easing. “The general feedback we have been hearing from investors is: look, there may not be a lot of downside from current levels given where the market is trading. And they do acknowledge that there could be a truly tactical rally in China which is our view — which is why we are overweight,” Koul said. Chinese stocks have been weak this year compared to other global markets, with shares falling on concerns over the sputtering cyclical recovery. The Shanghai Composite is up only 5% year-to-date, while the Shenzhen Component is 1% higher. In comparison, the S & P 500 has soared by 16%. In South Korea, Goldman expects a profit recovery driven by a “positive inflection” in DRAM pricing. Dynamic random access memory is a type of semiconductor memory needed for data processing. “Within Korea we lean towards semis, internet, chemicals, and autos, which benefit from structural themes of AI and batteries/EVs/decarbonization,” Goldman said in a June 25 note. Stock screen In the note, Goldman screened for 40 Asia-Pacific stocks with improving earnings growth momentum, stable earnings-per-share revisions, and reasonable valuations. “With valuations generally around fair levels, we think earnings delivery will be the key driver of equity performance,” the bank wrote. The following six stocks all appeared on the screen and are on Goldman’s conviction list of top buy-rated stocks:
