Asian companies selling goods globally, such as Toyota Motor Corp. and Mitsubishi Electric Co, may reduce earnings estimates in the coming week as economic growth slows. The prospect may send share prices lower.
Fujitsu Ltd and NEC Corp, two of Japan's biggest makers of computers, already cut annual sales forecasts. Sony Corp, the world's second-largest producer of consumer electronics, said revenue won't improve this year.
PHOTO: AFP
All three companies reported results during the past week as Japan's stock benchmarks completed their second monthly decline.
The Nikkei 225 Stock Average shed 2.8 percent and touched a 20-year low, while the Topix dropped 2.6 percent.
Earnings announcements from companies such as Toyota and Mitsubishi probably will reinforce the weakened outlook, which reflects lower demand and spending amid concern about a possible breakout of war in Iraq, some investors said.
"It's a difficult time to count on a recovery in corporate earnings," said Joji Maki, who helps manage US$3.6 billion as a senior director at Baring Asset Management (Japan) Ltd. "The deterioration in the global economy is becoming more apparent and there is still no clarity about the Iraq situation."
He's investing in companies with smaller market values.
During the past week, Japan's benchmark indexes had their biggest weekly losses since the week ended Oct. 11. The Nikkei fell 4.5 percent and the TOPIX slid 4.7 percent.
"Selling pressure in the market may remain as we see very few buyers," said Hiroichi Nishi, general manager of equity at Nikko Cordial Securities Co in Tokyo.
on holiday
Markets in Hong Kong, Taiwan, China, Singapore and Malaysia are shut until Feb. 4. The TAIEX until Feb. 6, while China reopens on Feb. 10.
Moves toward war in the Middle East would spur a sell-off in the region, some analysts said. Japanese companies may suffer along with exporters such as Hong Kong's Li & Fung Ltd, which is reliant on demand from the US, and airlines such as Singapore Airlines Ltd, whose fuel costs may rise.
Toyota, the world's third-largest largest automaker, is among companies reporting tomorrow. Four-fifths of the company's operating profit comes from North America. Others include Ricoh Ltd, the country's No. 2 office-equipment maker; TDK Corp, the largest maker of disk-drive parts, and Tokyo Electron Ltd, the world's second-largest maker of chip-production equipment.
Mitsubishi, Japan's third-largest cell phone maker and fourth- largest semiconductor manufacturer, also reports in the coming week. So do Hitachi Ltd, Japan's largest manufacturer of electronics, and Sharp Corp, the country's biggest producer of liquid-crystal displays.
Fujitsu, Japan's biggest business-computer maker, trimmed full-year sales and capital spending estimates and said customers are spending less. NEC, the country's largest maker of personal computers, cut a sales forecast as computer and network-equipment demand trailed projections. Sony said electronics sales fell.
The lower forecasts reflect economic weakness in the US, Asia's largest export market, as well as Japan.
A US government report said the economy grew at a 0.7 percent annual rate in the fourth quarter; analysts surveyed by Bloomberg had forecast 0.9 percent growth on average. Japan's industrial production in December fell 0.1 percent rather than rising 0.1 percent, the average estimate in another survey.
Slumping growth in the US may lead to losses for Li & Fung, which purchases clothing on behalf of companies such as Abercrombie & Fitch Co. The stock may help drag the Hang Seng Index lower along with Johnson Electric Holdings Ltd, a motor producer that gets a third of its sales from North America.
"These companies are quite sensitive as they rely quite heavily on the US market," said Linda Choi, who helps manage US$130 million, mainly in Hong Kong equities, at Asia Insurance Co.
War with Iraq may hurt consumer confidence and trim corporate spending. Airlines such as Singapore Air may face greater fuel costs if a war in the Middle East disrupts oil supplies. Hong Kong's Cathay Pacific Airways Ltd, and Korean Air Co may also suffer.
Investors may seek to buy shares of Woolworths Ltd, Australia's largest supermarket chain, and Westfield Trust, an owner of shopping centers throughout the country and New Zealand, as a haven in the event of a war.
"Investors will play defensively," said Albert Hung, who oversees US$470 million at Tower Asset Management Ltd in Sydney.
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