Asian stock markets may face disappointment as upcoming corporate earnings are projected to reveal struggles predating the Trump administration. Forward earnings estimates for the MSCI Asia Pacific Index have declined over 4% since September’s end, signaling a challenging economic landscape.
Illustrative chart of market performance. Replace with actual image from original article if available and update alt text accordingly.
China’s earnings growth for 2024 is anticipated to be weak despite stimulus efforts, while India’s thriving tech sector faces pressure to validate its high valuations. Further downgrades are possible as trade tensions escalate with potential US tariffs, threatening the export-dependent region and hindering the MSCI Asia benchmark’s recovery from its recent correction.
“Negative sentiment pervades the Chinese market due to Trump’s tariff threats,” notes Mohammed Zaidi, investment director at Nikko Asset Management. India’s vulnerability stems from “high valuations, capital influx, and intensified competition, increasing downside risk if earnings disappoint.”
Analyst estimates for regional corporate profits have plummeted to their lowest since 2009 compared to global counterparts. While a worst-case 60% tariff on Chinese goods has been averted for now, lingering uncertainty compels businesses to prepare for potential escalation.
Sector-Specific Outlooks:
Transportation:
- Toyota Motor Corp.: Operating profit likely declined further last quarter due to challenges in the US and Chinese markets, where established brands face intense competition from electric vehicle manufacturers.
- Hyundai Motor Co.: Growth is slowing due to US tariff threats and domestic political instability, impacting sales forecasts.
- Chinese EV Makers: BYD Co. anticipates record sales exceeding $100 billion, potentially surpassing Tesla Inc. in annual revenue. However, smaller rivals NIO Inc. and XPeng Inc. project quarterly losses.
- Contemporary Amperex Technology Co. Ltd.: Despite forecasting a 20% rise in net income, analysts remain focused on revenue following consecutive quarterly misses amid a price war.
Technology:
- Stargate Project: Asian tech investors anticipate increased demand for AI accelerators, high-bandwidth memory, and networking equipment driven by the $100 billion US Stargate initiative involving SoftBank, OpenAI, and Oracle.
- Data Center Spending: Strong datacenter and chip investment, crucial for AI development, continued into 2025, as indicated by results from Taiwan Semiconductor Manufacturing Co. and SK Hynix Inc. However, the sustainability of this investment without groundbreaking applications remains uncertain. Samsung’s upcoming insights will be crucial in assessing this trend.
- Chinese Tech Giants: Alibaba and Tencent’s results will shed light on the effectiveness of Beijing’s stimulus measures in boosting consumer spending during the holiday quarter.
Illustrative chart of technology sector growth. Replace with actual image from original article if available and update alt text accordingly.
Consumer:
- Chinese Restaurant Chains: Performance of companies like Yum China Holdings Inc. (KFC, Pizza Hut) will indicate consumer spending health amidst deflationary pressures. Yum China likely sustained sales and margin growth in Q4, maintaining its competitive edge in China’s price war.
- Haidilao International Holding Ltd.: While the challenging environment persists, improved profitability through efficiency gains is possible.
- Chinese Liquor Makers: Several companies, including JiuGui Liquor Co. and Shede Spirits Co., issued profit warnings due to weak consumer demand.
- Shiseido Co.: Continued weakness in the Chinese market, coupled with intensifying local competition, is expected to impact earnings, prompting a downward revision of the full-year operating profit forecast.
Banks:
- HSBC Holdings Plc: Focus will be on job cuts, restructuring costs, and potential business exits under CEO Georges Elhedery’s ongoing overhaul.
- Standard Chartered Plc: Progress on the $1.5 billion cost-cutting “Fit for Growth” program will be assessed. Both HSBC and Standard Chartered benefit from wealth management inflows from mainland China, but commercial property risks remain a concern.
Conclusion:
Asian corporate earnings face headwinds from various factors, including trade tensions, economic slowdown, and sector-specific challenges. Investors should brace for potential disappointments and closely monitor upcoming results for insights into the region’s economic health and individual company performance. The evolving geopolitical and economic landscape warrants cautious optimism in the near term.
