Jakarta: Asian corporate earnings may miss analyst estimates as costs climb and economic growth slows, with shipbuilders, chip makers and steel suppliers most at risk for downgrades,Macquarie Group Ltd said.
Analysts have pared earnings growth predictions for this year to about 3% from 10% at the end of last year, Macquarie’s Hong Kong-based analysts Tim Rocks and Henry Hon wrote in a report released on Wednesday. That remains too optimistic as earnings will shrink by 10%, they said.
The MSCI Asia-Pacific Index has dropped 22% this year as soaring fuel and food prices hurt global economies and profits, and the world’s largest financial companies posted writedowns and credit losses of more than $500 billion (around Rs21.85 trillion). The measure climbed 0.5% to 123.42 on Wednesday.
“Earnings forecasts remain dangerously high and the pace of cuts is much lower than in previous cycles,” the Macquarie analysts wrote in the report. “Analysts are underestimating the operating leverage in Asia and the scale of the downturn.”
South Korea, Indonesia and India are the most vulnerable to cuts in earnings-growth estimates, Macquarie said.
Analysts are expecting South Korean companies to report earnings-per-share growth of almost 14%, down just 1.9% since the start of 2008.
Estimates for Indonesia have climbed 4% during the period, while India’s earnings-growth forecasts have dropped 5.4%, according to Rocks and Hon. Taiwanese companies have fared the worst, with analysts slashing their profit-growth estimates by 22% during the period, the brokerage added.
Samsung Heavy Industries Co., the world’s second largest shipyard, has retreated 12% this year in Seoul trading. The company’s operating profit margin dropped to 7.5% in the second quarter, compared with 9.3% in the previous three months, as steel makers raised prices of steel products.
Steel Authority of India Ltd, the country’s second biggest steel maker, has plunged 50% this year. The company said on 21 July that earnings growth may slow for the rest of the year as costs climb to records and the government extends a three-month freeze on steel prices to tame inflation.