Southeast Asia to soar as China, West flounder

By Anshuman Daga and Vikram Subhedar, Reuters

SINGAPORE/HONG KONG — 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 infrastructure projects.

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 have said. “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 month. 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.