Equity analysts are cutting their estimates for Asian companies' earnings because of concerns about slowing global growth and the lack of a boost from China's reopening from COVID.
The analysts have cut their forward 12 month earnings estimates by 3.6 per cent since February, more than the 1.9 per cent increase in January, according to Refinitiv IBES data.
Some analysts think that China's recovery may not be enough to offset the weak global demand and supply constraints for export-reliant economies in the region.
Manishi Raychaudhuri, Asia-Pacific head of equity research at BNP Paribas, believes that the primary drivers of Asian earnings downgrades are concerns about the recession or a steep consumption slowdown in the developed markets.
The survey shows only 83 per cent of investors believe that there will be a rise in Asia Pacific ex-Japan equities in the next 12 months, down from 90 per cent in February.
Earnings at South Korean and Malaysian companies were downgraded by 4.9 per cent and 4 per cent, while analysts cut earnings forecasts for Taiwanese companies by 3.3 per cent in the past month.
Estimates for Chinese companies were cut by 1 per cent over the past month.
John Lau, head of Asian equities at investment firm SEI, said investors have turned cautious on Asian equities because of uncertainty over the direction of U.S. interest rates and new appointments in Chinese leadership.
He said that the earnings outlook in Asia could be negatively impacted by global demand uncertainty and soft economic data from the region, particularly from China.
Regional trade data shows that China's economic reopening has not boosted Asian exporters much so far. In February, Taiwan's exports fell to the lowest in nearly 24 months, while South Korea reported a fifth month of export declines.
March data showed that South Korea's 20 day exports to China fell 36.2 per cent year-on- year, while Taiwan's export orders to China fell 48.3 per cent in the first two months of the year, the biggest drop since early 2009.
In the last month, earnings in tech and real-estate were downgraded by 3.72 per cent and 3 per cent, while banking earnings were downgraded by 0.8 per cent.
The earnings releases trickling in 2022 were disappointing and spurred a recent round of downgrades, analysts said.
Herald van der Linde, HSBC's head of equity strategy for Asia Pacific, said that we are in a stage where we need to see more evidence of the strength of the recovery.