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Investors hoping for earnings to revive Asian stocks may be let down as upcoming results are likely to show companies were having a tough time even before Donald Trump took office.
The forward earnings estimates for members of the MSCI Asia Pacific Index have dropped more than 4% since the end of September, according to data compiled by Bloomberg. The picture is gloomy for the largest markets: China is expected to show tepid earnings growth for 2024 despite a stimulus blitz, while India’s booming tech sector is under pressure to justify its pricey valuations.
Further earnings downgrades may be on the horizon as the US president prepares to wield tariff tools, putting the trade-dependent region on edge. That suggests MSCI’s Asia benchmark will struggle to rebound after tumbling into a correction earlier this month.
“There is a lot of negative perception priced into the Chinese market since Trump started talking about 60% tariffs on Chinese goods,” said Mohammed Zaidi, investment director at Nikko Asset Management in Singapore. “India faces the hurdle of high valuations, a flood of new capital and increased competition making it susceptible to higher downside should earnings miss.”
Analyst estimates for corporate profit in the region have fallen to the lowest since 2009 relative to global peers, data compiled by Bloomberg show. While Trump has spared China from the worst-case scenario of being slapped a 60% levy for now, his unpredictability has companies bracing for worse to come.
Read: A Trader’s Guide to Navigating Trump’s Trade War Risks in Asia
Here’s a look at expectations for major industries this season:
Transport
Toyota Motor Corp. likely saw its operating profit drop further last quarter as it struggles to maintain ground in the US and China, where legacy brands face fierce competition from pure-electric names. The world’s biggest carmaker reports on Feb. 5.
Hyundai Motor Co. warned of slowing growth on Thursday as US tariff threats and a turbulent domestic political landscape hurt the South Korean automaker’s sales outlook.
The outlook is mixed for Chinese EV makers. BYD Co. is on track to unveil full-year sales that smashed through the $100 billion mark for the first time when it reports in March, putting it on course to leapfrog Tesla Inc. in annual revenue. Its smaller rivals NIO Inc. and XPeng Inc. are less fortunate, with both expecting quarterly losses.
China’s Contemporary Amperex Technology Co. Ltd, the world’s largest EV battery maker, said it sees a 20% rise in net income for last year, but analysts aren’t impressed. Instead, they are focusing more on revenue after a fifth quarterly miss amid an intensifying price war.
Technology
Asian tech investors are betting that Stargate — the $100 billion US endeavor spearheaded by SoftBank Group Corp., OpenAI and Oracle Corp. — will translate into another wave of demand for AI accelerators, high-bandwidth memory and networking gear this year.
Judging from the numbers already out from two of the sector’s linchpins — Taiwan Semiconductor Manufacturing Co. and SK Hynix Inc. — spending on the datacenters and chips that enable AI development stayed strong going into 2025.
The question is whether investment has peaked in the absence of truly revolutionary applications. Samsung executives next week will provide their insights into that question.
Chinese majors — Alibaba Group Holding Ltd. and Tencent Holdings Ltd. — will offer a snapshot of whether Beijing’s stimulus measures trickled down into real consumer spending during the holiday quarter.
Consumer
Chinese restaurant chains will also help investors gauge the health of spending in an economy mired in deflation.
Yum China Holdings Inc. — which operates KFC and Pizza Hut on the mainland — likely continued its growth in sales and margins during the fourth quarter as it maintains the lead in China’s bruising consumer-price war. It reports on Feb. 6.
The industry backdrop remained challenging for hotpot chain Haidilao International Holding Ltd. as consumers reduce dining out, but it may show improved profitability through efficiency gains when results are out in March.
Several Chinese liquor makers issued profit warnings, citing subdued consumer demand. JiuGui Liquor Co. said it expects its full-year net income to drop by nearly 100%, while Shede Spirits Co. forecast a drop of similar magnitude for 2024.
Shiseido Co. is expected to see weakness in the China market continue to drag on earnings due Feb. 10. The Japanese cosmetics maker has been struggling as China’s lackluster real estate and stock markets hurt consumer sentiment, while competition from local brands intensified. In November, it lowered its full-year operating profit forecast.
Banks
Among major financial stocks listed in Hong Kong, HSBC Holdings Plc’s results due mid-February will be closely watched for job reductions, costs related to restructuring, and any potential business exits from certain countries as Chief Executive Officer Georges Elhedery continues a sweeping overhaul.
Standard Chartered Plc may report further progress on its cost reduction efforts under the “Fit for Growth” program, which aims to save $1.5 billion through more than 200 internal initiatives. The lender is due to report on Feb. 21.
Both lenders count Hong Kong as one of their most important markets. Their share prices have outperformed the Hang Seng Index this year, with outlook supported by wealth-management fund flows from mainland China, though commercial property risks linger.
--With assistance from Danny Lee, Nicholas Takahashi, Daniela Wei, Dong Lyu, Ambereen Choudhury, Edwin Chan and Abhishek Vishnoi.
(Updates with details on Chinese liquor makers’ profit warnings in Consumer section.)
