Asian Earnings Ahead of the Week: Alibaba, Tencent, Japanese Megabanks

(Bloomberg) – Asia’s key earnings could present a mixed bag this week, with Chinese retail giant Alibaba expected to widen their profit margin as Japan’s three largest banks could suffer larger paper losses on bond positions ester.

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Japanese megabanks will detail their earnings performance on Monday and analysts expect tepid results weighed down by slow loan growth. The Nikkei newspaper reported Sunday that between them, the three banks’ total unrealized losses from foreign bonds are likely to reach the highest amount since March 2015. This week ends most of Japan’s earnings season, which has so far revealed a marked divergence between companies that beat expectations in an increasingly difficult global context and those that do not live up to it.

Later in the week, Tencent and the online retail giants will post their earnings in the wake of China’s announcement that it will shift gears on the Covid Zero policy that has cast a shadow over the country’s long-term prospects. Alibaba, which reported its second-quarter earnings Thursday, likely saw its first Ebita margin expansion in three years after cutting losses in local consumer services and Southeast Asia, according to Bloomberg Intelligence. The retailer’s earnings come in the wake of the Singles Day shopping event, which Citi analysts described as disappointingly flat for Alibaba and surprisingly positive for

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Highlights to look for this week:

Monday: Japan’s three megabanks will post earnings on Monday after the market closes in Tokyo. No particular fireworks are expected in the second quarter reports. Market participants will observe how lenders are moving towards their goals for the entire year. Mitsubishi UFJ Financial Group (8306 JP) is aiming for net profit of 1 trillion yen this fiscal year, with smaller rivals Sumitomo Mitsui Financial Group (8316 JP) and Mizuho Financial Group (8411 JP) forecasting 730 billion yen respectively and 540 billion yen. With interest rates in the US soaring as the Bank of Japan is stubbornly blocking yields near zero, all eyes will be on rising paper losses on lenders’ foreign bond holdings. Meanwhile, analysts expect MUFG to embark on another stock buyback program this quarter.

Tuesday: No major gains are expected.

Wednesday: Tencent (700 HK) will report third quarter earnings after the market closes. It recorded its first decline in revenue last quarter and investors are eager to see if the downward trend continues. According to Bloomberg Consensus estimates, third quarter revenue is expected to decline by 0.4% from the previous year. Wall Street analysts have lowered their price targets more in the past few months and the shares fell to their lowest level in five years last month. According to CICC, onshore and offshore gaming activities are under pressure and growth has been weak during the traditionally peak summer season. Further comments on the divestment of its equity portfolio are also in the spotlight as the Chinese giant was long predicted to cut its investments in response to Beijing’s antitrust rules.

Thursday: Alibaba (BABA US) is scheduled for Asian evening. The Chinese e-commerce giant could record its first year-over-year expansion of the adjusted Ebita margin since 2019, thanks to the lowest expected losses on its online food delivery platform and its Southeast Asian arm. Lazada, wrote BI. Analysts expect sales to have grown 4.3% in fiscal second quarter, down from the 29.4% gain recorded in the same period last year, mirroring the revenue concerns raised by JPMorgan when it cut l price target in September.

Friday: (JD US) reports after market close in Hong Kong. The third quarter results of the second Chinese online retailer follow Singles’ Day and Alibaba’s earnings, with Bloomberg Consensus forecasting the highest gross margin in the past two years. The improved product mix and platform fees could offset the higher compliance charges resulting from China’s mobility limits, BI wrote. However, potentially weaker entrepreneurial sentiment in the country could drag the contribution to service revenues down this quarter, BI added.

–With the assistance of Crystal Chui and Sophie Jackman.

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