Salomons sees mixed Asia equities earnings growth

Salomons sees mixed Asia equities earnings growth

SINGAPORE (Reuter): Salomon Brothers said yesterday that the earnings growth outlook in 1996 in equity markets in southeast Asia and parts of Asia differs significantly for each market.

But most markets are expected to post strong earnings growth next year, it said in a report.

"Growth in Hong Kong is low in absolute terms but momentum should improve as 1996 unfolds," it said.

Singapore should post growth in the mid-teens in 1996 but initial forecasts for 1997 point to a decline to the low teens.

On Malaysia, it said earnings growth should decelerate to low absolute levels in the next two years.

"After a slow year in 1995, earnings momentum in Thailand should improve in 1996 and strong absolute growth rates look achievable," it said.

Indonesia, it said, should post further rapid earnings increases the next two years. "Earnings estimates in the Philippines also point to strong growth, but we expect some downward adjustment to estimates in response to higher rates and recent natural disasters," Salomon Brothers said.

It said earnings growth in Korea is slowing but absolute levels should remain high. Taiwan profits should slow next year and then rebound in 1997, it said.

Salomon Brothers also said it expects tight monetary conditions in most of the ASEAN (Association of Southeast Asian Nations) economies during the first half of 1996.

It said in a research report that this is a consequence of the external imbalances and inflationary pressures that have garnered attention recently.

ASEAN groups Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and new member Vietnam.

"We still believe short-term rates will ease downwards later in the year as current account deficits begin to reduce, but further upward rate pressure is likely in the near term," Salomon Brothers said.

In contrast, rates in Korea and Taiwan were likely to fall because of different inflation and current account conditions and, in Taiwan's case, very low money supply growth.

"Hong Kong's rates should echo those in the United States, where we continue to expect Fed easing," it said.

Meanwhile, Paul O'Donnell, director of Bankers Trust (BT) Fund Managers, said in Hong Kong yesterday that Asian equity markets have been volatile recently, but the overall outlook is positive.

"We have had a couple of years of the doldrums, but I think this is coming to a close. If there is a time to get in, it probably is right now," said O'Donnell.

"While there has been overheating in some economies, particularly Malaysia, Thailand, Indonesia and the Philippines, where strong investment is causing current account deficits to blow out, the respective governments have taken measures to address these concerns," said O'Donnell.