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Lacklustre earnings expected for S’pore companies

The earnings reporting season for the second quarter of this year is approaching. Given the disappointing economic numbers out so far, Singapore companies are expected to turn in a lacklustre set of results.

SINGAPORE: The earnings reporting season for the second quarter of this year is approaching.

Given the disappointing economic numbers out so far, Singapore companies are expected to turn in a lacklustre set of results.

UBS Wealth Management said that for all of this year, Singapore corporate earnings could be among the weakest in the region.

Much of Northeast Asia can look forward to better corporate earnings this year.

In China for example, mainland-listed companies are expecting earnings growth of 19 per cent, according to data from Thomson Reuters, giving the market its best performance in four years.

Similarly, export-driven markets like Taiwan and South Korea are expected to turn in earnings growth in the mid to high teens as global export demand and the tech cycle recovers.

But it is a different picture in Singapore.

Kelvin Tay, regional chief investment officer (southern APAC) at UBS Wealth Management, said: "Singapore market earnings are among the weakest in the entire Asia ex-Japan region. We're looking at about 8 per cent growth this year, and we're certainly not expecting any surprises to come from the second quarter, or the first-half results.

“Some sectors will fare better, other sectors will fare worse. We do expect some of the export-oriented companies to fare better where earnings are concerned.”

Analysts say Singapore-listed firms that will report stronger earnings in the upcoming results season will be those that export to the US and China where growth is seen to be improving – including commodity traders and exporters.

Another sector that will likely do well is banks, which should see a lift from rising interest rates and better lending margins.

On the other hand, those expected to show weaker earnings are domestically-driven sectors like telcos and property developers.

Daryl Liew, head of Portfolio Management at Reyl Singapore, said: "On the big picture on Singapore stocks, there are still concerns on a cost level -- labour for one, rents for the other, particularly commercial rents which are still heading up. So I think domestic companies will still struggle."

Emerging Southeast Asian markets like Indonesia and the Philippines, as well as the export-driven markets of Northeast Asia, are expected to post double-digit earnings growth.

Those markets at the bottom of the pile with Singapore are Malaysia and particularly Thailand, where multiple revisions to growth have been made on political uncertainty. 

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