2018 Outlook: Why Asia has done well this year?

Our regional outlook is based on positive trends in domestic consumption, global economic growth, interest rates and infrastructure spend

Dec 8, 2017 | Stuart Parks

2017 has seen Asian equity markets rally largely due to the strength of corporate earnings. At the start of the year, earnings growth expectations for 2017 were low at approximately 10%, but over the course of the year they have been revised up to 20%. The recovery has been helped by a combination of factors such as: solid global economic expansion, a lack of disruption from President Trump, falling bond yields in some Asian markets and a small earnings rerating.

What is the outlook for earnings in 2018?

In our view, the outlook for earnings growth in 2018 is broadly positive. Consensus earnings growth expectations for 2018 have been gradually moving up over the course of this year and are now close to 10%. Recently, these expectations were boosted by China’s second quarter 2017 results season, in which almost two-thirds of companies beat expectations.

Elsewhere, consensus earnings estimates for the Indian market were marginally revised upwards for the full year 2018, post significant downward revisions over the summer months. Going forward, Indian earnings growth should benefit from easier year-on-year comparisons after the government’s demonetisation of high-value currency (November 2016) and the introduction of the Goods & Services Tax (July 2017) reduced prior year numbers.

 

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