KUALA LUMPUR: Companies in emerging markets in the Asia-Pacific (Apac) region are expected to do better than their rivals in the developed markets, according to Moody’s Investors Service.
However, it said, ongoing political tensions and uncertain economic conditions could pose a risk to recovery.
Moody’s vice-president and senior analyst Rachel Chua said that on aggregate, the earnings before interest, taxes, depreciation and amortisation (Ebitda) of emerging market companies in Apac would grow 28% this year compared with 2019, while developed market companies that it also rated would grow only 14% in the same period.
However, she noted, emerging market companies had taken on more debt relative to earnings growth, resulting in weaker debt to Ebitda.
“Their average leverage will rise to 5.1 times in 2022 from 4.3 times in 2019, compared with developed market companies’ largely stable leverage of around 4.5 times,” she said.
The Moody’s report said companies in China, Indonesia, India, Malaysia and Thailand would see earnings growth of varying degree, with those in Indonesia reporting the highest uptrend of 56%, followed by 51% in India and 36% in Thailand.
“This will be driven by commodity producers benefitting from high spot prices,” the report said.
Sector-wise, Moody’s said earnings and leverage would improve for most industries, with the earnings of metals, mining and steel as well as oil and gas companies growing the most on elevated prices.
“Consumer-focused industries such as autos and retail will benefit from pent-up demand as social restrictions ease,” it said.
“Geopolitical uncertainties related to the Russia-Ukraine military conflict and the still-fractious US-China relationship, and the soft macroeconomic environment will pose downside risks to these projections. Any further weakening in global economic conditions will hurt Moody’s earnings projections for 2022,” it added.
Source: https://www.freemalaysiatoday.com/category/business/local-business/2022/09/05/businesses-in-emerging-markets-to-fare-better/