* China's slowing domestic demand takes bite out of earnings
* Australia lags Asia, developed market peers on revisions
* Hong Kong, Taiwan also feeling the heat
* ASEAN earnings relatively resilient; valuations not cheap
By Anshuman Daga and Vikram Subhedar
SINGAPORE/HONG KONG, July 12 Australian
companies' fortunes faded even faster than those in
recession-hit Spain over the last month, dragged down by a
slowing Chinese economy that is also hurting companies in Taiwan
and Hong Kong, Thomson Reuters StarMine data shows.
Projections for forward 12-month earnings for Australia have
come off 5 percent over the past month, twice as much as the 2.4
percent cut to Spanish company forecasts. Across the
Asia-Pacific, estimates have slipped 1.4 percent, and globally
they have been cut by 1.2 percent.
Southeast Asia, however, is showing resilience and is
expected to benefit further from a commodity boom, greater
foreign investment and government-driven investment in
As the second-quarter earnings season kicks off, companies
around the world are rushing to lower expectations. Some have
singled out China as a source of weakness. Growth in the world's
second-largest economy probably slowed to a three-year low of
7.6 percent in the second quarter, economists polled by Reuters
"North Asian companies are seeing the biggest downgrades.
Generally investors and analysts are more forgiving on ASEAN
than North Asia," said Markus Rosgen, head of Asia-Pacific
equity strategy at Citigroup.
He said the biggest earnings risks appeared to be in the
technology and materials sectors.
SOMBRE DOWN UNDER
In Australia, the cuts flood in even after an already ugly
For mining major Rio Tinto , eight analysts
have reduced their forecasts for 2012 earnings by an average 5.3
percent over the last two weeks, data from StarMine shows.
And it doesn't stop there.
Credit Suisse analyst Paul McTaggart slashed his estimates
for the company's 2013 earnings by a fifth on Thursday, saying
the company's reliance on iron ore and copper leaves it highly
exposed to any sustained downturn in Chinese construction.
Taiwan is also feeling the pain. Exports from Taiwan, one of
Asia's most export-oriented economies, with an exports-to-gross
domestic product ratio of 74 percent, shrank for the fourth
straight month in June.
Analysts have cut 2012 earnings estimates for Acer
by 6.9 percent on average over the past 30 days. From the seven
analysts who have revised Acer's forecasts recently, the
estimates have come off on average by a fourth.
With investor eyes glued to China, more bad news is
At least half a dozen Chinese companies -- ranging from a
steelmaker to the country's biggest airline -- have warned
investors in the space of weeks that earnings would be softer
than expected on slowing growth.
WORK AND PLAY AND PROFIT
Southeast Asia is faring better, with companies in
Singapore, the Philippines and Malaysia holding firm.
In Singapore, companies are benefiting from the booming
tourism industry and strong retail consumption as the city-state
slowly transforms itself from a regional trade and financial
centre into a place for both work and play.
Analysts have raised earnings estimates for hotel owner CDL
Hospitality Trusts, shopping mall developer
CapitaMalls Asia and property developer City
Southeast Asian markets have been the flavour of the year,
with Vietnam, the Philippines and Thailand figuring among the
world's best performing stock markets in the first half.
In the first quarter, the Philippine economy grew 6.4
percent year-on-year, second only to China among Asian
economies, and President Benigno Aquino told Reuters last week
he expected the pace to accelerate in the second quarter.
"Major countries in the region appear to be in an investment
phase, which we think is good timing. In the midst of a global
slowdown, the ASEAN region can carry on with both fiscal and
monetary support to help sustain growth," said Pauline Ng,
investment manager at JPMorgan Asset Management in Singapore.
"Support from public spending and plans to increase
production should have multiple benefits," said Ng, who helps
manage about $3.5 billion invested in ASEAN equities.
Subdued interest rates in many countries give additional
spending firepower to the fast-growing middle class.
But the heavy interest in Southeast Asian markets is
stretching valuations which are now at significant premiums to
The Philippines, for example, is currently trading at about
14.5 times forward earnings compared with a 9.5 multiple for the
Asia-Pacific, StarMine data shows. Indonesia trades at 13 times.
Australia, meanwhile, trades at 10.5 times forward earnings
and Hong Kong is roughly in line with the region.