Asian companies see earnings upgrades by analysts over the past month

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(Reuters) - Analysts raised 2023 earnings estimates for Asian companies over the past month, contrasting with the raft of earnings downgrades in the last year, as China's reopening and slowing inflationary pressures boost optimism.

MSCI Asia-Pacific's 2023 earnings estimates were raised by 2.5% over the past month, with China's earnings raised by 3.1%, followed by Japan's 2.3%.

By sector, analysts lifted consumer discretionary and industrials earnings by over 2% in the past month, while financials and tech companies were increased by 1.2% each.

GRAPHIC: MSCI Asia-Pacific index's estimates change - https://fingfx.thomsonreuters.com/gfx/mkt/zjpqjeqblvx/MSCI%20Asia-Pacific%20index's%20estimates%20change.jpg

After three years, mainland China reopened its borders to international passengers, which is expected to boost the tourism sector and revive faltering exports in the region.

Goldman Sachs (NYSE:GS) raised Asia Pacific's 2023 profit growth estimate to 4% from 3%, and 2024 growth to 14% from 12%.

"North Asia is likely to lead after ASEAN and India strengthened in 2022 as China markets rebound further and Korea anticipates recovery," the brokerage said on Monday.

Last year, analysts cut their forward 12-month earnings by 7% as the region's revenues shrank due to China's stricter COVID-restrictions and as higher product prices affected companies' profit margins.

GRAPHIC: Breakdown by country for estimates changes - https://fingfx.thomsonreuters.com/gfx/mkt/mypmogmeepr/Breakdown%20by%20country%20for%20estimates%20changes.jpg

The MSCI Asia-Pacific index dropped about 20% in 2022, the biggest yearly decline in 14 years. But, that has also made the region's stock valuations cheaper.

The forward 12-month price-to-earnings ratio(P/E) of MSCI Asia-Pacific stood at 12.4, compared with the MSCI World's 14.5 and the MSCI USA's 17.1.

GRAPHIC: Breakdown by sector for estimates changes - https://fingfx.thomsonreuters.com/gfx/mkt/gkplwxmonvb/Breakdown%20by%20sector%20for%20estimates%20change%20in%20last%2030%20days.jpg

"In general, valuations of Asian equities look attractive compared with those of developed markets. We expect to see more divergence in stock performance, and the market focus should gradually turn back to fundamental and sustainable growth, said Minyue Liu, an investment specialist at BNP Paribas (OTC:BNPQY) Asset Management.

The P/E ratio of China and Vietnam stood at 9.4 and 9.3, respectively, while those of India and Thailand were at 19.9 and 16.1.