Asia Ex-Japan Earnings Will Fall 9% in 2008, UBS Says

By Kyung Bok Cho

Nov. 7 (Bloomberg) -- Asian companies outside Japan will report a 9 percent decline in profit this year as a global recession saps demand for the region's exports, UBS AG said, citing a consensus of analysts.

``Any hope that Asian earnings could remain resilient in a global recession has proved once again misplaced,'' Niall MacLeod and Aakash Rawat, Hong Kong-based strategists, wrote in a report, citing estimates compiled by IBES International Inc.

Industrial stocks face the ``greatest risk'' of further earnings downgrades as leading economic indicators continue to fall, they said. Earlier this year, analysts had expected Asian earnings to grow 10 percent, according to the report.

A worsening credit crisis that toppled Lehman Brothers Holdings Inc. and stunted global growth has driven the MSCI Asia Pacific Index down 46 percent this year. Toyota Motor Corp., the world's second-largest automaker, slashed its profit forecast by 56 percent yesterday, while Cathay Pacific Airways Ltd., Hong Kong's biggest carrier, said on Nov. 5 that earnings will be ``disappointing.''

``It is still too early, in our opinion, to breathe a sigh of relief that economic growth is stabilizing and earnings are about to rebound,'' UBS said in the report. ``Earnings downgrades are likely to continue.''

Asian economies will probably expand less than initially expected in 2009 as the likelihood of recession in the world's biggest economies increase, Asian Development Bank President Haruhiko Kuroda said. The U.S. economy, the world's largest, contracted in the third quarter at the fastest pace since 2001.

South Korea and Taiwan have seen the biggest cuts in earnings estimates because they depend on global demand for their technology exports, UBS said.

Hannstar, Taihan

Earnings for industrial stocks have more room to fall going forward, the analysts wrote.

``Industrial earnings in Asia ex Japan have only fallen by 15 percent in 3 months, despite their tremendous gearing to the economic cycle,'' they said.

Companies with deteriorating outlooks for 2008 and 2009 include Hannstar Display Corp., Taiwan's fifth-largest liquid- crystal display maker, and China Shipping Container Lines Co., the country's second-biggest cargo-box carrier, according to UBS.

Meanwhile, companies expected to show the most earnings growth this year and the next include China Agri-Industries Holdings Ltd., the country's second-biggest vegetable-oil producer, and Taihan Electric Wire Co., a South Korean maker of cables and wires, UBS said.

To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net