In a time of corporate gloom, Southeast Asian companies bring some light

Southeast Asia is becoming one bright spot in a world of gloomy corporate earnings, with strong profit growth powered by a population of 600 million people increasingly willing, and able, to spend in their fast growing economies.

Southeast Asian companies are expected to report on average a 16.2 percent increase in quarterly profit from a year ago, Morgan Stanley said in a report this month.

That compares to dreary corporate profits in China and others in the Asia-Pacific region, like Australia, that depended heavily on the now weakened buying power of major economies such as China.

Economic growth in the region is expected to be underpinned by domestic consumption, induced by fiscal spending, private investments and an increase in wages. This trend is notable in Thailand, Indonesia, Malaysia and the Philippines, said Ronald Chan, head of equities in Asia at Manulife Asset Management.

The domestic demand story is structural in nature and has yet to run its course.

The Morgan Stanley report pointed to strong performances by companies including Indonesia's top gas distributor Perusahaan Gas Negara, Thailand's top energy firm PTT Pcl and Philippine conglomerate San Miguel Corp.

The robust profits contrast with the story in China, once the darling of emerging-market investors.

Last week, Chinese telecom equipment maker ZTE Corp flagged a third-quarter loss that would erase its profit earlier in the year. China Life Insurance Co Ltd also issued a profit warning.

Analysts have cut estimates for Chinese companies in the MSCI China index every month since June 2011, according to Thomson Reuters I/B/E/S. September's revisions were the worst in 2-1/2 years after grim first-half report cards.

After years of heady growth, export-orientated economies that benefited from Chinese demand are now suffering as orders from China slide.

We've seen some atrocious earnings numbers from Hong Kong, and Taiwan, and Australia as well. This clearly reflects either a China link or a developed market link, said John Woods, Citi Private Bank's chief investment strategist for Asia Pacific.

... contd.

ALSO READ

GST panel says no to placing mobiles in declared goods list

Indian card processor in $45 mn heist is ElectraCard

Weekly review: Rupee plunges to one-month low against US dollar

Weekly review: Market flies high on smart rally, Sensex, Nifty at 28-mth peak