Asian equities see biggest earnings upgrade in five months

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Man stands in front of an electronic board displaying stock information at a brokerage firm in Hangzhou

By Gaurav Dogra

– Asian equities in January received the biggest upgrade in their forward 12-month earnings estimates in five months, boosted by higher commodity prices and demand for technology exports in the region. Analysts raised their forecasts for the MSCI Asia-Pacific index’s forward 12-month earnings by 1.15% in January, marking the biggest upgrade since August 2021.

GRAPHIC – MSCI Asia-Pacific index’s estimates change

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The energy sector’s forward 12-month earnings were revised upwards by 2.9%, while the technology and mining sector received upgrades of 1.7% and 1.6%, respectively.

“Commodities are supportive. Industrial metal prices continued to surge due to tight physical markets, which indicate support to earnings (for the region). Chip exports continued to increase sequentially,” said Suresh Tantia, senior investment strategist, Credit Suisse.

GRAPHIC – Breakdown by sector for estimates change in last 30 days

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Companies in Taiwan, Australia and Thailand lured earnings upgrades of 4.9%, 2.5% and 2.2%, respectively.

“Asian benchmark indices generally carry a greater percentage of financials in their allocation – this will support Asian markets and earnings outlook. Banks are one of the key beneficiaries of rising interest rates” said Anthony Raza, head of multi-asset strategy at UOB Asset Management.

GRAPHIC- Breakdown by country for estimates changes in last 30 days

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Refinitiv data showed that 55% of the region’s large- and mid-cap Asian companies have beaten the average earnings forecasts by analysts, while 58.1% of the companies topped the estimates in the third quarter. “We see mixed signals for further revisions to Asian EPS. The latest quarter results in Asia have seen one of the lowest beat ratio in the last 10 years,” said Credit Suisse’s Tantia. “Overall, we see limited dominating catalysts at the moment to keep earning revisions move strongly higher.”

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Sherry Jacob-Phillips)

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