Market Strategist
Summary: Earnings focus moves to Asia this week, even though US retail earnings from Walmart and Home Depot will still be key. Outlook from airlines like Singapore Airlines and Qantas, as well as commodity giants like BHP and Rio and Singapore’s agri player Wilmar, will add more colour on the potential pickup in Chinese demand. China’s tech sector and its progress on ChatGPT style products will also be a key focus as Alibaba and Baidu report. Singapore bank earnings also in focus.
Alibaba (BABA:xnys) and Baidu (09888:xhkg) report earnings this week, and the key focus will be on the outlook on the potential for artificial intelligence (AI) as well as the impact from easing crackdown of the Chinese government on the internet companies. While Baidu is likely to see the ongoing recovery in its advertisement business and upside in cloud opportunity become more supportive, key focus for investors will be on any further details on its ChatGPT-style product which the company is expected to launch in March. Alibaba is also likely in the race for an AI Chatbot, but earnings will take some time to capture the real enthusiasm from China’s reopening. Both Alibaba and Baidu have seen a rebound in their share prices this year, market will be focused on evidence of an earnings recovery and a strong outlook to sustain the price momentum.
Earnings reports from Singapore Airlines (C6L:xses), Qantas Airlines (QAN:xasx) and Air New Zealand (AIZ:xasx) will be key to assess how the Asia reopening theme has been playing out. More importantly, the outlook for the travel and tourism sector will be on watch in anticipation of the return of Chinese tourists. US airlines earnings results for Q4 have been strong amid booming demand and a decline in jet fuel prices, and a similar momentum remains likely from Asian airline results due in the week.
Singapore Airlines has recently reported a 400% increase in passenger traffic in January from last year amid year-end traffic and the Lunar New Year holiday, but it is still trading below historical averages and at a discount to its regional peers. Qantas is expected to return to profitability, and also appears undervalued despite being up 55% from its 2022 lows. Air New Zealand also reports this week.
Singapore’s largest bank DBS (D05:xses) reported bumper Q4 earnings last week, and declared a special dividend. The other two banks, UOB (U11:xses) and OCBC (O39:xses) will be reporting this week and are also likely to show resilient earnings. UOB reports on Thursday pre-market and may be able to garner gains in net interest income and show a greater impact from the acquisition of Citi’s retail banking business, but that will be offset by lower wealth management fee amid continued investor caution. OCBC's profit remains more vulnerable than that of DBS and UOB due to its large wealth-management and insurance businesses, which account for 50% of non-interest income.
Resource company BHP Group (BHP:xnys) reports earnings before Australia open on Tuesday, and dividend payout is expected at USD 0.88, well below the USD 1.50 declared in February 2022 amid the Oz Minerals acquisition being in play. Market expects lower revenues and earnings compared to last year due to the weakness in iron ore and copper prices. Rio Tinto (RIO:xlon) reports full year results on Wednesday, and plans for Pilbara (PLS:xasx), its lithium arm, will be key to watch. The focus will also be on BHP and Rio’s upcoming projects and outlook for the year ahead, with supply constraints reigning and expectations of Chinese demand picking up. Another lithium player Allkem (AKE:xasx) also reports results this week. On the agri side, Singapore’s Wilmar (F34:xses) is expected to report record profits for 2022 and outlook is likely to remain positive as well with China demand picking up.
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