Despite fears of slowing growth globally, companies seem set for a relatively strong performance this year — especially in Asia, according to one expert.
That is, guidance from companies on their expected earnings for this year have been “pretty good,” said Ken Wong, Asia equity portfolio specialist at asset management firm Eastspring Investments.
“Despite all this talk (about the) trade war slowing down economic growth, companies are still seeing a fairly decent amount of earnings growth expectations for 2019,” he told CNBC’s “Street Signs” on Tuesday.
Talk of a recession heightened in the last few weeks as developments in March sent ominous signs of a potential downturn. For one, the yields on long-term U.S. debts became lower than those of short term debts: A so-called yield curve inversion is widely regarded as one of the most reliable recession indicators in the market
On top of that, weak economic data also stoked fears: Manufacturing activity in the eurozone dropped to its lowest level in more than six years in March. And, the U.S. Federal Reserve, adopted a significantly dovish stance, projecting no further interest rate hikes this year, and justifying its more temperate outlook by cutting the 2019 growth outlook for the U.S.
All those signals “had a lot of people spooked,” Wong said. “But then, we started talking to companies … when they reported their numbers, what they said to us was: Actually, 2019 is looking to be pretty solid, things are picking up.”
Such companies are still expecting double-digit growth in markets like China, Hong Kong and India, he added.
Although the Fed isn’t projecting any new 2019 rate increases at the moment, Wong said a decision from the central bank to hike would be an opportunity for investors to capitalize on any stock market correction.
“If markets do correct … that’s a perfect opportunity to start gradually accumulating shares as well. Because yes, we still have a bit of a short-term impact on share prices,” he said. “But then again, because we’ve seen how … earnings are actually still fairly solid especially in this part of the world.”
“If companies do see their share prices correct 5%, 10%, why not double down and actually increase share exposure on some of the … fundamentally sound companies,” Wong added.
Not everyone is forecasting such a bullish environment, however.
On Monday, Morgan Stanley sounded a warning, predicting that there will be a “full-blown earnings recession” in American companies. Michael Wilson, Morgan Stanley’s chief U.S. equity strategist, said he’s looking for two or more quarters of negative or flat growth, meeting the technical definition of a recession.
— CNBC’s Patti Domm contributed to this report.
