Asian firms’ earnings outlook improves as chip sector shines By Reuters

By Gaurav Dogra and Patturaja Murugaboopathy

(Reuters) – A key Asian stock index posted its biggest boost to earnings forecasts in three years as the region’s semiconductor firms benefit from a 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 rose 3.9% in the past month, according to LSEG IBES data which gathers the analysts. estimates.

It was a particularly strong jump after downward revisions and smaller increases for the first seven months of this year.

Forecasts for South Korean firms rose 8 percent, while those for companies in Taiwan and Japan rose 5 percent.

Samsung Electronics ( KS: ), for example, forecast strong demand for AI-driven chips this year after posting a more than 15-fold increase in second-quarter operating profit. Taiwan’s TSMC, the world’s largest chip maker, raised its full-year revenue forecast.

“The updates to Asian corporate earnings expectations are mainly due to updates from South Korea and Taiwan, following the improvement in semiconductor earnings,” said Minyue Liu, equity specialist at BNP Paribas (OTC:) Asset Management.

The data also showed that 12-month EPS forecasts for Chinese firms were raised by 1.5% in the past month.

“Many investors are choosing to ignore China, even though some companies’ earnings beat market expectations,” said Elizabeth Soon, head of Asia ex-Japan equities at PineBridge Investments.

“The ratio of rates to earnings has narrowed and measures to stabilize the housing market are a positive indicator of government support.”

Although China’s domestic demand remains weak, manufacturing profit growth showed a slight improvement in July.

Elsewhere, earnings outlooks for Indonesian, Australian and Indian companies were on average slightly downgraded over the past month.

A Reuters analysis of MSCI Asia Pacific index components that have so far reported earnings in the second quarter shows that net profit rose an average of 29.2 percent from a year ago, the biggest increase in two years.

The MSCI Asia-Pacific index is up 9.7% this year.

By sector, EPS projections for technology firms rose 7.5%, while those for the communications services and consumer discretionary sectors rose 5% each. EPS forecasts for the utility, known for its high dividend payouts, were raised by around 20% as electricity demand is expected to rise in regional economies such as India. Forecasts for healthcare firms rose 8%.

Analysts predict the US Federal Reserve’s interest rate cuts will boost earnings and boost Asian stocks.

Mark Haefele, chief investment officer for global wealth management at UBS, said it has historically seen an average price return of about 10 percent in the 12 months since the first rate cut in the past six Fed easing cycles. Regional stocks often outperform U.S. stocks when the dollar weakens by 5-10 percent, he noted.

“We see an equally positive economic backdrop this time around, supported by healthy earnings growth. About 60% of companies in Asia ex-Japan beat expectations midway through the second quarter of the season,” he said.