Thailand
Moody’s picks emerging Asia to shine
The earnings growth of Asia-Pacific emerging market companies in 2022 relative to the pre-pandemic year of 2019 is set to outperform that of developed market companies, according to a new report by Moody’s Investors Service.
Yet ongoing political tensions and uncertain economic conditions will present risks to recovery, the international ratings agency said.
“On aggregate, the Ebitda [earnings before interest, tax, depreciation and amortisation] of Moody’s-rated emerging market companies in Asia-Pacific will grow 28% this year from 2019, while rated developed-market companies’ earnings will grow 14% in the same period,” said Rachel Chua, a Moody’s vice-president and senior analyst.
“But emerging market companies have taken on more debt relative to earnings growth, resulting in weaker debt to Ebitda.”
According to Ms Chua, the average leverage of emerging-Asia firms will rise to 5.1 times in 2022 from 4.3 times in 2019, compared with “largely stable leverage” of around 4.5 times for developed-market companies.
Companies in China (to which Moody’s assigns an A1 stable sovereign rating), Indonesia (Baa2 stable), India (Baa3 stable), Malaysia (A3 stable) and Thailand (Baa1 stable) will see earnings growth of varying degrees, with those in Indonesia reporting the highest growth of 56%, followed by 51% in India and 36% in Thailand, according to the ratings agency. This will be driven by commodity producers benefiting from high spot prices, said Moody’s.
By sector, earnings and leverage will improve for most industries, with the earnings of metals, mining and steel companies as well as oil and gas firms growing the most in light of elevated prices, according to Moody’s.
Consumer-focused industries such as automotives and retail will benefit from pent-up demand as pandemic-era social restrictions ease, said the firm.
But the earnings of gaming companies in Macau (Aa3 stable) will decline on continued travel restrictions in China, and Chinese property developers’ Ebitda will fall on the back of weakened homebuyer confidence, according to Moody’s.
Geopolitical uncertainties related to the Russia-Ukraine conflict and the still-factious US-China relationship, as well as the soft macroeconomic environment, will pose downside risks to these projections.
Any further weakening in global economic conditions will hurt earnings projections for 2022, Moody’s analysts concluded.
Source: https://www.bangkokpost.com/business/2387911/moodys-picks-emerging-asia-to-shine