Asian Markets: Carrying Some Positive Momentum Into 2017

A good news to Asian countries! With the positive rise in Asian market, we can expect a positive result  in the domestic economy of every countries.

Last November, the Invesco International and Global Growth team reported that in Asia ex-Japan, the building blocks were in place to shore up top-line growth. Our outlook for Earnings, Quality and Valuation (EQV) was cautiously positive. 2016 marked the first time in five years where earnings forecasts did not collapse at year-end, and an upward bias to earnings forecasts has continued into 2017. Is this the beginning of a new earnings growth cycle?

For years, slowing top-line growth in Asia, combined with an inability to raise prices, had driven consistently negative earnings revisions. So far, 2017 is proving to be different. Earnings forecasts are being revised upward from cyclically depressed levels, and the drivers behind the revisions are more fundamentally sound — see the reasons below:

  • After declining for most of 2015 and 2016, Asian exports have begun to rebound.1
  • Increased exports are driving increased operating leverage, which improves earnings quality.
  • The recent strengthening in commodity prices has provided an economic tailwind for some countries in the region.2
  • Improving margins and asset turnover, along with reduced financial leverage, are boosting return on assets (ROA) and return on equity (ROE).1

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