Asian stock markets are poised for further gains after a remarkable rally in the first half of the year, according to insights from Goldman Sachs. The financial institution emphasizes that investors should prioritize diversification into commodities, as geopolitical tensions are expected to bolster long-term demand for metals and energy infrastructure.
Goldman Sachs points to key structural themes, including artificial intelligence, power infrastructure, and defense spending, not only as drivers of Asia’s equity performance but also as vital factors reinforcing the case for commodities, especially copper and gold. In their outlook for Asian equities in the second half of the year, Goldman encourages investors to maintain focus on winning sectors, highlighting that earnings growth is a more significant market driver than valuations.
The bank retains an overweight recommendation on North Asia, with particular favor towards South Korea, Taiwan, Japan, and China’s domestic A-share market, as well as sectors like technology hardware, capital goods, and banking. Analysts at Goldman noted that the ongoing semiconductor memory supercycle is a powerful theme that remains undervalued in the market.
Expectations for the MSCI Asia Pacific ex-Japan Index suggest mid-teen returns in the latter half of the year, underpinned by projected earnings growth of 60% in 2026 and 22% in 2027. Goldman pointed out that nearly 80% of the year-to-date performance in the regional markets is attributable to earnings growth or shifts in earnings forecasts, indicating a heightened market focus on these earnings metrics.
Rather than turning to lagging sectors after the substantial gains seen in technology, Goldman advocates for continued investment in structural winners—namely AI infrastructure, power generation, defense, capital-intensive industries, and selected Chinese market themes.
In its commodity outlook, the bank highlights that the ongoing instability in the Strait of Hormuz underscores the importance of diversifying into commodities, even as oil prices experience a decline following the reopening of shipping routes. Goldman analysts remarked that the sustained conflict in Iran strengthens the underlying demand for power and metals more than for oil and gas.
The emphasis on energy security, along with investments in artificial intelligence infrastructure, electrification, and increased defense spending, are anticipated to fuel demand for industrial metals like copper, lithium, and aluminum. Furthermore, investments in electricity grids and power generation are expected to drive copper demand beyond the rate of mine supply for years to come. The recent forecast for copper prices has been adjusted upward, with Goldman projecting $13,735 a metric ton by the end of 2026. They assert that prices may need to hit approximately $15,000 by 2035 to stimulate the necessary new supply.
Gold maintains its status as a preferred investment, even after a robust rally since 2022, with a forecast of $4,900 an ounce by the end of 2026. This optimism is attributed to ongoing central bank purchases as emerging-market reserve managers shift away from traditional reserve assets. While higher interest rates may temporarily impact demand within exchange-traded funds, Goldman believes that geopolitical uncertainties and fiscal sustainability concerns will continue to support gold prices in the medium term.
