Goldman Sachs forecasts 19% return for Asian stocks in 2027
Goldman Sachs expects the MSCI Asia ex-Japan Index, which tracks Asian equities excluding Japan, to deliver a 19% return in U.S. dollar terms in 2027. Corporate earnings growth is expected to be the main driver, although uncertainty surrounding artificial intelligence investments could increase volatility.
According to Bloomberg, the bank's analysts upgraded Chinese H-shares and Indian equities to overweight. At the same time, they downgraded Chinese A-shares and Taiwan's stock market to neutral.
Goldman Sachs maintained its overweight recommendations on South Korea and Japan. The revisions reflect the bank's efforts to balance regional investments amid uncertainty over future returns from AI-related companies.
Goldman Sachs revises Asian market forecasts
In a report led by Timothy Moe, analysts noted that the market decline in the second half of 2026 had already reflected deteriorating investment conditions, although the outlook for next year remains favorable.
"The market decline in the second half of 2026 has already priced in less favorable, but still good, investment conditions for 2027," the report stated.
According to the bank, equity valuations remain attractive, although significant differences exist between individual countries in the region.
The MSCI Asia ex-Japan Index has lost approximately 13% since reaching an all-time high in June. The sell-off primarily affected technology companies that had previously benefited from heightened interest in artificial intelligence.
Despite the correction, the index remains up approximately 11% in U.S. dollar terms since the beginning of 2026. Stock markets in South Korea and Taiwan have made the largest contributions to those gains.
Analysts also expect most Asian economies to slow in 2027. Additional interest rate hikes by the U.S. Federal Reserve could constrain economic growth and investment activity.
AI spending and capital flows create new risks
Goldman Sachs forecasts further increases in capital expenditure on artificial intelligence infrastructure, although the pace of growth is likely to peak.
In a separate report, analysts noted that investors no longer automatically view increased spending by technology companies as a positive development. Meanwhile, tensions persist in credit markets.
Record debt issuance and high levels of equity offerings could constrain liquidity and increase financing costs. This creates additional risks for companies investing heavily in AI development.
Meanwhile, Japanese corporations continue to redirect capital overseas, primarily to the United States. Weak domestic economic growth, a declining population and a reduced presence in China are supporting this trend.
Japan has remained the largest foreign investor in the United States for seven consecutive years. Companies are expected to continue expanding their U.S. operations despite tariff risks, a weak yen and calls from Tokyo authorities to increase domestic investment.
Earlier, we reported that Japanese authorities again warned about the risks of sharp fluctuations in the yen's exchange rate as it approached 160 per U.S. dollar. Government officials expressed concern about the speed of movements in the foreign exchange market.
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