Earnings will take centrestage for Asian stock investors in the week ahead with technology bellwether Intel Corp due to report
HONG KONG: Earnings will take centrestage for Asian stock investors in the week ahead with technology bellwether Intel Corp due to report and investors looking for signs that will sustain an extended rally in regional markets.
China’s Communist Party Congress, the country’s most significant political gathering in five years, will also be closely watched to see if President Hu Jintao can further consolidate power.
China’s urbane commerce minister and a reform-minded former central bank governor are tipped to get new jobs in a reshuffle around the key meeting, putting new faces in senior posts in the world’s fourth-biggest economy.
China’s 17th Communist Party Congress, which kicks off on Monday, could make for choppy trade with investors cautious that Beijing could step up its monetary tightening policy.
“The volatility in the market will probably increase,” said Patrick Shum, strategist at Karl-Thomson Securities, who expects the Hang Seng index to find support at 27,500. “The market will have a correction, but it will be short-term and a rebound should quickly follow.”
Major Asian firms reporting their results in the coming week include South Korean steel maker Posco and India’s top software services exporter, Tata Consultancy Services. MSCI’s measure of Asia Pacific stocks excluding Japan, which set four successive record closing highs in the past week, has rallied 40% from its low when markets tumbled in August and is up about 42% so far this year.
While some markets are seen prone to pullbacks amid worries that they may be
overheated following stellar gains, many analysts remain upbeat about Asian stocks,
underpinned by solid growth and a robust outlook for the
region.
JP Morgan analysts said the region’s trailing and forward price earning (PE) ratios were at 16.8 and 15 times respectively, higher than all regions, including Japan.
“Despite high valuations, monetary conditions and earnings growth momentum remain favourable for PE expansion,” said strategist Adrian Mowat.
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