Analysts cut earnings estimates for Asian companies amid growth concerns

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A general view of the central financial district at sunset, in Hong Kong, China on March 11, 2021. REUTERS / Tyrone Siu

October 21 (Reuters) – Asian corporate profits were lowered for the first time in 16 months, data showed, amid concerns over slowing growth in China and fears that higher inflation and Supply chain disruptions do weigh on profits.

According to data from Refinitiv IBES estimates, MSCI Asia-Pacific companies’ profit estimates for the next 12 months were reduced by 1.3% over the past month, the first downward revision since June 2020.

“We are becoming cautious about the earnings outlook for Asian companies,” said Alvin So, equity strategist at Goldman Sachs in a note this week.

“We expect MXAPJ profits to grow 32% this year and 9% in 2022-2023, cumulatively 5% below the upward consensus on BPA 2023, with risks resulting from the impact of the virus, growth and China’s policy, supply disruption and cost inflation. “

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Asian businesses have enjoyed back-to-back earnings improvements, with analysts predicting regional businesses to outperform lower profits posted in early 2020, when economies were hit due to lockdowns.

However, companies are now facing higher baseline numbers as most countries emerged from lockdowns and delivered better profits in the second half of last year.

The consumer discretionary sector suffered a decline of around 2.5%, while the healthcare, consumer staples, technology and materials sectors saw their estimates revised down by more than 1% each.

The International Monetary Fund cut this year’s economic growth forecast for Asia on Tuesday and warned that a new wave of COVID-19 infections, supply chain disruptions and inflationary pressures pose risks on the downside for the outlook.

“Based on the current pace of vaccine rollout, herd immunity (in the ASEAN region) is at least six months away,” ANZ Bank said in a report.

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Analysts also said that monetary tightening measures by major central banks would increase the borrowing costs of regional businesses and reduce their profits.

The Chinese economy hit its slowest growth rate in a year in the third quarter, hit by power shortages and swings in the real estate sector. Read more

Reporting by Gaurav Dogra, Patturaja Murugaboopathy and Anurag Maan in Bengaluru; edited by Uttaresh.V

Our standards: Thomson Reuters Trust Principles.


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