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Asian companies see earnings upgrade for 13th month - Refinitiv data

·2 min read
General view of the Central financial district during sunset, in Hong Kong

(Reuters) - Asian firms continued to receive earnings upgrades in July, highlighting sustained hopes of a recovery and optimism that equity prices will be bolstered in the second half of this year.

According to Refinitiv data, Asian companies' forward 12-month earnings estimates were lifted by 1.9% in July, which was the 13th consecutive profit upgrade by analysts.

(GRAPHIC: MSCI Asia-Pacific index's estimates change - https://fingfx.thomsonreuters.com/gfx/mkt/akvezgjbbpr/MSCI%20Asia-Pacific%20index's%20estimates%20change.jpg)

Goldman Sachs, which expects 35% EPS growth for MSCI Asia Pacific ex-Japan this year, said continued robust sales growth and margin recovery will be the drivers of stronger earnings.

"We expect 8% regional index upside in the second half of the year, but the path may be bumpy given the large number of macro concerns," it said.

After a rally in the first half of this year, Asian shares faltered in July, hit by rising cases of the more infectious Delta variant of COVID-19 in the region.

Australian companies led the region's upgrades in July as analysts raised their forward 12-month profit estimates 11.5%.

Analysts also raised their earnings estimates for Japanese, Taiwanese and South Korean firms by 2.4%, 2.3% and 0.8% respectively.

(GRAPHIC: Breakdown by country for estimates changes in last 30 days - https://fingfx.thomsonreuters.com/gfx/mkt/byvrjobgzve/Breakdown%20by%20country%20for%20estimates%20changes%20in%20last%2030%20days.jpg)

"Japanese corporates have piggy-backed on the back of rising global trade. There are still potential upside surprises from inventory restocking, an upswing in global capex and a very sharp turn-around in European growth," brokerage Jefferies said in a report.

South Korean exports jumped to a record high in July, boosted by overseas demand for chips and biohealth products.

According to a Reuters poll, Taiwan's exports have likely risen for a 13th month as the global economy traces its path back to recovery with sustained work-from-home trends.

The earnings upgrades also came on the back of solid second-quarter results posted by Asian companies so far.

Refinitiv data showed 64% of companies that have announced second-quarter results have beaten the forecasts of analysts.

Meanwhile, China, Thailand, Philippine and Malaysian firms faced earnings downgrades in the last month.

(GRAPHIC: Breakdown by sector for estimates changes in last 30 days - https://fingfx.thomsonreuters.com/gfx/mkt/zgvomwyqdvd/Breakdown%20by%20sector%20for%20estimates%20changes%20in%20last%2030%20days.jpg)

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Bernadette Baum)

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