Goldman Sachs expects 8% of Asian earnings to beat expectations

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Goldman Sachs expects 8% of Asian earnings to beat expectations

General view of Central financial district during sunset, in Hong Kong.

According to Refinitiv data, Asian companies' forward 12 month earnings estimates were increased by 1.9% in July, which is the 13th consecutive profit increase by analysts.

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 strong earnings.

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

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

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

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

The Japanese economics have piggybacked on the back of rising global trade. There are still potential upside surprises from inventory replenishing, an upswing in European capex and a very sharp turn-around in global growth, broker 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 increased 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 after solid second-quarter results posted by Asian companies so far.

Refinitiv data showed that 64% of companies that released 2nd-quarter results have beaten the forecasts of analysts.

Meanwhile, China, Malaysian and China companies faced stock market meltdowns in the last month.