(Reuters) – Analysts are cutting Asian companies’ 2020 earnings forecasts sharply on concerns that factory shutdowns and social distancing measures to combat the spread of coronavirus will hurt corporate profits badly this year.
Analysts have cut their profit estimates by 6.4% over the past month, Refinitiv data showed.
Last week, Goldman Sachs lowered its forecast for the region’s 2020 earnings per share (EPS) growth to -14% from +1%, bringing the aggregate cuts since the virus outbreak to 24 percentage points.
“We expect further substantial negative revisions. Among the larger markets, we lower our China 2020 earnings growth 6pp to -6%, Korea 42pp to -20%, Taiwan 32pp to -30% and India 12pp to -3%,” it said.
According to Refinitiv data, South Korea faced the biggest earnings downgrades in Asia, with an average cut of 24% in the past month.
South Korea’s exports dipped 0.2% year-on-year in March, data showed on Wednesday, as the coronavirus affected factory production and supply chains.
Indonesia, Thailand, and Australia also faced cuts of over 10% each over the past month.
Among industries, energy sector firms faced a 23% cut, the biggest to 2020 earnings as a result of a sharp decline in oil prices over the past month.
With more people locked inside their homes, the consumer sector also faced bigger downgrades, the data showed.
Interest rate cuts across the region to bolster economies against the coronavirus outbreak are also likely to affect the banking sector’s profits, some analysts said.
In the first quarter, MSCI’s broadest index of Asia-Pacific shares <.MIAP00000PUS> plunged about 20%, registering the biggest quarterly decline since September 2008.
Graphic: Change in Asian companies’ profit estimates https://fingfx.thomsonreuters.com/gfx/mkt/xlbpggkypqd/Change%20in%20Asian%20companies%20profit%20estimates.jpg
Graphic: Asian companies’ sector-wise profit estimates change https://fingfx.thomsonreuters.com/gfx/mkt/jbyprlgbpeo/Asian%20companies%20sector-wise%20profit%20estimates%20change.jpg
(Reporting by Gaurav Dogra and Patturaja Murugbaoopathy in Bengaluru; Editing by Jan Harvey)
