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Asia Firms’ Earnings Forecasts Slashed Over Output Fears

South Korea’s factory activity has contracted at its sharpest rate in two years and manufacturing numbers in Japan, Taiwan and China have all slipped

Factory chimneys are seen at Keihin industrial zone in Kawasaki, south of Tokyo, Japan, August 18, 2016. REUTERS/Kim Kyung-Hoon
Factory chimneys are seen at Keihin industrial zone in Kawasaki, south of Tokyo, Japan. Photo: Reuters


Twelve-month earnings forecasts for Asian corporates have slumped over fears about the slide in manufacturing output and worries over a drop in shipments to Covid-hit China.

According to Refinitiv data, Asia’s large and mid-cap companies’ forward 12-month earnings estimates have been slashed by 2.8% over the past month. In the past three months, the estimates have been cut by 5%, the data showed. 

South Korean and Taiwanese companies led the earnings downgrades in the region over the past month, as they faced cuts of 5.5% and 3.5%, respectively. Japan and China followed, with cuts of about 3.4% each. 


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Japan’s factory activity grew at its slowest rate in nearly a year in August, while that of South Korea contracted at its sharpest rate in two years, PMIs for both countries showed. 

Manufacturing activity also deteriorated in Taiwan, with production and new orders both falling at the fastest pace since the initial wave of the pandemic in May 2020. 

“Taiwan may see further negative earnings revisions following a continued contraction in manufacturing PMI and ongoing semiconductor sales declines on a sequential basis,” Goldman Sachs analysts wrote. 

“Following sustained weakness in tech exports and an unchanged US ISM (manufacturing index), the Korean market may see the largest earnings downgrades given its sensitivity to global growth and the manufacturing cycle.”


Covid, Heatwaves Hit China Factories

China’s factory activity also extended declines in August, hit by new Covid infections, heatwaves, and an embattled property sector.

Analysts expect the slowing Chinese economy will further weaken the region’s earnings in coming months. 

“Starting from March, exports to China within the region slowed sharply, before falling into year-over-year contraction in May,” BofA Global Research said in a note.

“Asia will likely suffer more from persisting demand weakness in China in the coming quarters, especially given its substantial direct exposure to the Chinese economy.” 

On the other hand, Vietnam’s and Indonesia’s earnings forecasts were raised by 0.7% and 0.5%, respectively. 


  • Reuters with additional editing by Sean O’Meara


Read more:

China Factory Activity Dropped Further in August, Data Shows

Japanese Factory Output Sets Fastest Pace in Nearly a Decade


Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.


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