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On August 29, 2024
2 Sources
[1]
Asian firms' earnings outlook improves as chip sector shines
A key Asia stock index has gained its biggest lift in earnings projections in more than three years, as the region's semiconductor firms benefit from the boom in generative artificial intelligence. Also helped by robust second-quarter results across a wide range of industries, the average of 12-month earnings per share forecasts for companies in the MSCI Asia Pacific index climbed 3.9% over the past month, according to LSEG IBES data that collates analysts' estimates. It was a particularly sharp jump after downward revisions and smaller increases for the first seven months of this year. Projections for South Korean firms surged 8% while those for Taiwanese and Japanese companies rose 5%. Samsung Electronics, for example, forecast strong AI-driven demand for chips this year after logging a more than 15-fold rise in second-quarter operating profit. Taiwan's TSMC, the world's largest contract chipmaker, has raised its full-year revenue forecast. "The upgrades in Asian companies' earnings expectations are mainly due to upgrades in South Korea and Taiwan on the back of improving semiconductor earnings," said Minyue Liu, an equity investment specialist at BNP Paribas Asset Management. The data also showed forward 12-month EPS forecasts for Chinese firms have been lifted 1.5% in the past month. "Many investors are choosing to ignore China even though some companies' earnings have beaten market expectations," said Elizabeth Soon, head of Asia ex-Japan equities at PineBridge Investments. "The ratio of misses to beats in earnings has narrowed and property market stabilization measures are a positive indicator of the government's support." Although domestic demand in China remains weak, manufacturing profit growth showed mild improvement in July. Elsewhere, earnings outlooks for Indonesian, Australian and Indian companies were on average lightly downgraded over the past month. A Reuters analysis of constituents in the MSCI Asia Pacific index that have reported second-quarter earnings so far shows net profit on average jumping 29.2% from last year, the most growth in two years. The MSCI Asia-Pacific index has risen 9.7% so far this year. By sector, EPS projections for tech firms rose 7.5%, while those for the communication services and consumer discretionary sectors climbed 5% each. EPS forecasts for utilities, known for their high dividend payouts, were lifted some 20% with electricity demand expected to surge in regional economies like India. Forecasts for healthcare firms gained 8%. Analysts predict U.S. Federal Reserve rate cuts will bolster earnings and boost Asian equities. Mark Haefele, chief investment officer for global wealth management at UBS, said MSCI Asia ex-Japan has historically seen a median price return of around 10% in the 12 months following the first rate cut in the past six Fed easing cycles. Regional equities often outperform U.S. stocks when the dollar weakens by 5-10%, he noted. "We see a similarly positive economic backdrop this time around, bolstered by healthy earnings growth. Around 60% of Asia ex-Japan companies have beaten expectations midway through the second quarter season," he said. (Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Vidya Ranganathan and Edwina Gibbs)
[2]
Asian firms' earnings outlook improves as chip sector shines
(Reuters) - A key Asia stock index has gained its biggest lift in earnings projections in more than three years, as the region's semiconductor firms benefit from the boom in generative artificial intelligence. Also helped by robust second-quarter results across a wide range of industries, the average of 12-month earnings per share forecasts for companies in the MSCI Asia Pacific index climbed 3.9% over the past month, according to LSEG IBES data that collates analysts' estimates. It was a particularly sharp jump after downward revisions and smaller increases for the first seven months of this year. Projections for South Korean firms surged 8% while those for Taiwanese and Japanese companies rose 5%. Samsung Electronics, for example, forecast strong AI-driven demand for chips this year after logging a more than 15-fold rise in second-quarter operating profit. Taiwan's TSMC, the world's largest contract chipmaker, has raised its full-year revenue forecast. "The upgrades in Asian companies' earnings expectations are mainly due to upgrades in South Korea and Taiwan on the back of improving semiconductor earnings," said Minyue Liu, an equity investment specialist at BNP Paribas Asset Management. The data also showed forward 12-month EPS forecasts for Chinese firms have been lifted 1.5% in the past month. "Many investors are choosing to ignore China even though some companies' earnings have beaten market expectations," said Elizabeth Soon, head of Asia ex-Japan equities at PineBridge Investments. "The ratio of misses to beats in earnings has narrowed and property market stabilization measures are a positive indicator of the government's support." Although domestic demand in China remains weak, manufacturing profit growth showed mild improvement in July. Elsewhere, earnings outlooks for Indonesian, Australian and Indian companies were on average lightly downgraded over the past month. A Reuters analysis of constituents in the MSCI Asia Pacific index that have reported second-quarter earnings so far shows net profit on average jumping 29.2% from last year, the most growth in two years. The MSCI Asia-Pacific index has risen 9.7% so far this year. By sector, EPS projections for tech firms rose 7.5%, while those for the communication services and consumer discretionary sectors climbed 5% each. EPS forecasts for utilities, known for their high dividend payouts, were lifted some 20% with electricity demand expected to surge in regional economies like India. Forecasts for healthcare firms gained 8%. Analysts predict U.S. Federal Reserve rate cuts will bolster earnings and boost Asian equities. Mark Haefele, chief investment officer for global wealth management at UBS, said MSCI Asia ex-Japan has historically seen a median price return of around 10% in the 12 months following the first rate cut in the past six Fed easing cycles. Regional equities often outperform U.S. stocks when the dollar weakens by 5-10%, he noted. "We see a similarly positive economic backdrop this time around, bolstered by healthy earnings growth. Around 60% of Asia ex-Japan companies have beaten expectations midway through the second quarter season," he said. (Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Vidya Ranganathan and Edwina Gibbs)
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Asian companies are experiencing an improved earnings outlook, largely driven by the resurgence of the semiconductor industry. This positive trend is particularly evident in tech-heavy markets like South Korea and Taiwan.
The earnings outlook for Asian companies has shown significant improvement in recent months, with the semiconductor industry emerging as a key driver of this positive trend. Analysts have revised their earnings forecasts upward, particularly for tech-heavy markets such as South Korea and Taiwan 1.
According to Refinitiv data, the earnings estimates for MSCI Asia-Pacific companies have been raised by 1.3% over the past month. This increase is notable as it marks the first time in two years that earnings upgrades have outpaced downgrades [1]. The positive sentiment has been reflected in market performance, with the MSCI Asia-Pacific index rising by about 3% in April, reaching its highest level since August 2022.
South Korean and Taiwanese companies have seen the most significant earnings upgrades in the region. Analysts have raised their earnings forecasts for South Korean firms by 6.4% and Taiwanese companies by 5.4% in the past month 2. This surge is largely attributed to the strong performance of semiconductor manufacturers in these countries.
Taiwan Semiconductor Manufacturing Co (TSMC), the world's largest contract chipmaker, has played a crucial role in driving this positive outlook. The company reported better-than-expected first-quarter earnings and raised its 2023 capital spending plan [2]. TSMC's strong performance has had a ripple effect on the broader tech sector in the region.
The improved earnings outlook for Asian firms is partly due to recovering global demand for tech products and growing excitement around artificial intelligence (AI) applications. These factors have contributed to increased orders for semiconductor manufacturers, leading to higher production and improved financial performance [1].
Despite the overall positive trend, some sectors and markets continue to face challenges. Chinese companies, for instance, have seen a 0.7% downgrade in their earnings forecasts over the past month [2]. This highlights the uneven nature of the recovery across different parts of Asia and various industry sectors.
As the semiconductor industry continues to show strength, analysts expect the positive earnings trend for Asian companies to persist throughout 2023. However, they caution that factors such as global economic conditions, geopolitical tensions, and potential supply chain disruptions could still impact the overall outlook for the region's corporate earnings [1].
Reference
[2]
Semiconductor stocks experience a significant surge, driven by positive earnings reports and reduced concerns over chip export restrictions. Industry giants like AMD and Nvidia lead the rally, marking the sector's strongest performance in months.
6 Sources
Asian stock markets experienced a significant downturn, mirroring Wall Street's losses driven by mixed tech earnings and ongoing concerns about China's economic slowdown. The tech sector's poor performance and the strengthening yen added to the market pressures.
9 Sources
Asian stock markets face downward pressure following Nvidia's underwhelming quarterly results, sparking concerns about the AI chip market and broader tech sector performance.
8 Sources
Despite recent market selloffs, Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung Electronics express confidence in AI-driven growth at a major trade show. The semiconductor giants project strong demand for AI chips, contrasting with overall market trends.
5 Sources
Samsung Electronics reports a significant increase in second-quarter profits, driven by strong demand for AI chips and higher semiconductor prices. The company expresses optimism about future growth in the AI sector.
10 Sources