In a recent analysis by CLSA, quoting Bloomberg’s projections, Asian earnings growth is forecasted to outpace that of the US and Europe for both this year and the next. This optimistic outlook aligns with the Reserve Bank of India’s (RBI) latest monetary policy report, which predicts a robust growth rate of 7.2 per cent for India in the fiscal year 2025.
Strong Earnings Growth in Asia
According to CLSA, projections for Earnings Per Share growth (EPSg) reveal that the Morgan Stanley Capital International (MSCI) Asia-Pacific index is expected to see a substantial increase of 15.0 per cent in 2024, followed by a steady 11.9 per cent in 2025.
In contrast, the MSCI World index, which includes global companies, is expected to grow by a more modest 7.9 per cent in 2024 and 11.9 per cent in 2025.
The US market, represented by the S&P 500, is forecasted to grow by 10.5 per cent in 2024 and 13.1 per cent in 2025. Meanwhile, Europe’s growth, represented by the MSCI Europe index, is predicted to face a decline of 5.2 per cent in 2024, before recovering to an 8.1 per cent increase in 2025.
Emerging markets (MSCI EM), driven largely by Asian economies, are expected to see the most significant growth with an 18.1 per cent increase in 2024 and 14.7 per cent in 2025.
The strongest performer among these, MSCI Asia excluding Japan, is expected to achieve a remarkable 22.9 per cent growth in 2024 and 15.3 per cent in 2025. This highlights the shifting focus towards Asia as a critical driver of global economic growth.
India stands out in the Asian growth narrative, with the RBI’s projection of a 7.2 per cent growth rate for 2025 reflecting strong domestic economic fundamentals.
This growth is attributed to various factors, including strong consumption, a resilient services sector, and a boost in investment and infrastructure development. Key metrics such as EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and net margins are being closely watched, with many Asian stocks showing continued expansion in these areas.
Moreover, companies that consistently improve their Return on Equity (ROE) and Economic Value Added to Invested Capital (EVA/IC) are gaining significant attention.
Technological Advancements Bolster Asian Markets
In addition to earnings growth, the rapid advancement of artificial intelligence (AI) technologies is contributing to the positive outlook in the Asian market. The rising demand for AI capabilities and associated technologies, such as data centers and the requisite computational power, is expected to bolster economic growth further.
A recent report by Yew Kiang Wong, Head of REITs Research, emphasizes the potential for significant gains in the ASEAN region from these technological advancements.
The integration of AI technologies across various industries in Asia is expected to drive efficiency and productivity, leading to higher profitability for companies.
This technological leap is not only limited to large corporations but is also being adopted by small and medium-sized enterprises (SMEs), which are crucial for economic growth in the region.
The increased adoption of AI is likely to result in enhanced operational efficiencies, cost savings, and the creation of new business models and revenue streams.
Furthermore, the growth of e-commerce, fintech, and other tech-driven sectors is contributing to the overall positive economic outlook in Asia.
Governments in the region are also playing a supportive role by investing in digital infrastructure and creating favorable regulatory environments to foster innovation and growth in the tech sector. This strategic focus on technology is positioning Asia as a leader in the global digital economy.
Shifting Dynamics in the Global Economy
The stark contrast in earnings growth forecasts between Asia and other regions underscores the shifting dynamics in the global economy.
Investors and analysts are increasingly looking to Asia for growth opportunities, driven by strong economic fundamentals, technological advancements, and favorable demographic trends.
Asia’s young and growing population provides a solid foundation for long-term economic growth. The region’s expanding middle class is driving consumption and demand for goods and services, further boosting economic activity.
Additionally, ongoing infrastructure development projects across the region are enhancing connectivity and facilitating trade and investment.
As the global economy continues to evolve, Asia is poised to play an increasingly important role. The region’s robust economic fundamentals, combined with its technological advancements and favorable demographic trends, make it an attractive destination for investors seeking growth opportunities.
The focus on innovation and digital transformation is expected to drive sustained economic growth, positioning Asia as a key driver of the global economy in the coming years.
The optimistic earnings growth forecasts for Asia highlight the region’s potential to outpace the US and Europe.
With strong economic fundamentals, technological advancements, and supportive government policies, Asia is well-positioned to lead the global economy into the future. Investors and analysts will continue to monitor the region closely as it takes on an increasingly prominent role on the world stage.
