Asia-Pacific Q2 Earnings Rise 233% Year Over Year; Korea Rebounds 18% Friday but Still Falls for Week
The MXAPJ Index rose 2.3% for the week, led by offshore China, India and Australia.
The MXAPJ Index rose 2.3% for the week, led by offshore China, India and Australia.
South Korea rebounded 18% on Friday after a US$5.2 billion one-day foreign inflow, but it still declined 1% for the week. The size of leveraged ETFs has been cut in half from its peak, while margin-loan balances are declining slowly.
Regional fund flows in July showed large outflows from South Korea and Taiwan, while South Asia recorded inflows. Q2 2026 earnings showed that 45% of companies beat expectations and 23% missed them, with a median surprise of positive 3.7%. Over the same period, MXAPJ earnings rose 233% year over year. Rising market dispersion points to a strongly micro-driven environment.
The underlying logic, according to Goldman Sachs, is that high earnings growth combined with greater dispersion creates better opportunities for stock-selection alpha than for index beta. Goldman Sachs highlights overweighting South Korea, China A shares and Taiwan, and says China, Australia, Taiwan and Singapore offer stronger alpha opportunities.
The potential trading implication is to focus on individual-stock alpha rather than index beta in the current high-dispersion environment, with greater weight on markets offering stronger alpha opportunities.
The note identifies South Korea, China A shares and Taiwan as beneficiaries, and highlights alpha stock-selection opportunities in China, Australia, Taiwan and Singapore. It also cautions that the South Korean market has already partly priced in the foreign inflow following Friday’s rebound, while the slow unwinding of leveraged ETFs and the risks associated with margin loans remain areas to monitor.
Key catalysts are the pace of deleveraging in South Korea’s leveraged ETFs, the persistence of foreign inflows into South Korea, and the direction of earnings revisions during the remainder of the Asia-Pacific reporting season.
In summary, Asia-Pacific Q2 earnings rose 233% year over year, and higher market dispersion is creating substantial stock-selection alpha opportunities. Goldman Sachs highlights overweighting South Korea, China A shares and Taiwan.
South Korea rebounded 18% on Friday after a US$5.2 billion one-day foreign inflow, but it still declined 1% for the week. The size of leveraged ETFs has been cut in half from its peak, while margin-loan balances are declining slowly.
Regional fund flows in July showed large outflows from South Korea and Taiwan, while South Asia recorded inflows. Q2 2026 earnings showed that 45% of companies beat expectations and 23% missed them, with a median surprise of positive 3.7%. Over the same period, MXAPJ earnings rose 233% year over year. Rising market dispersion points to a strongly micro-driven environment.
The underlying logic, according to Goldman Sachs, is that high earnings growth combined with greater dispersion creates better opportunities for stock-selection alpha than for index beta. Goldman Sachs highlights overweighting South Korea, China A shares and Taiwan, and says China, Australia, Taiwan and Singapore offer stronger alpha opportunities.
The potential trading implication is to focus on individual-stock alpha rather than index beta in the current high-dispersion environment, with greater weight on markets offering stronger alpha opportunities.
The note identifies South Korea, China A shares and Taiwan as beneficiaries, and highlights alpha stock-selection opportunities in China, Australia, Taiwan and Singapore. It also cautions that the South Korean market has already partly priced in the foreign inflow following Friday’s rebound, while the slow unwinding of leveraged ETFs and the risks associated with margin loans remain areas to monitor.
Key catalysts are the pace of deleveraging in South Korea’s leveraged ETFs, the persistence of foreign inflows into South Korea, and the direction of earnings revisions during the remainder of the Asia-Pacific reporting season.
In summary, Asia-Pacific Q2 earnings rose 233% year over year, and higher market dispersion is creating substantial stock-selection alpha opportunities. Goldman Sachs highlights overweighting South Korea, China A shares and Taiwan.