Asia's robust economic recovery from last year's coronavirus low is losing momentum as a surge in COVID-19 cases sees shops empty again and factories close, dimming prospects for corporate profit growth after a blockbuster half year.
The rapid spread of the highly infectious Delta variant of the novel coronavirus and low vaccination rates have caught much of the region off-guard, especially in emerging markets, even as economies in Europe and North America reopen.
Asia's biggest firms are likely to post their first quarter-on-quarter profit decline in six quarters in July-September, falling 6.19%, showed a Reuters calculation based on Refinitiv Eikon analyst data of 1,069 companies with market capitalisation of at least $1 billion.
In the near-term, much depends on vaccination progress in Southeast Asia - a major production base - and whether China takes extra steps to support its economy, Fujito said.
SUPPLY HEADACHES
In Southeast Asia, soaring COVID-19 cases and subsequent lockdown measures have hit economic activity in both the services and manufacturing sectors.
Factory activity in the region contracted in July at the fastest pace since June last year, IHS Markit data showed.
BASE EFFECT
The extent of any economic slowdown in Asia will not be fully known until governments release third-quarter gross domestic product (GDP) estimates later this year.
Asian economies that were moving from a state of relative openness to lockdown will probably see their GDP contract quarter-on-quarter, said ING's Carnell.
ING has already trimmed its growth forecasts for Thailand, Malaysia, Indonesia, the Philippines and Australia, he said.
"You're seeing 30-40% (year-on-year) export growth in many cases but you've got very strong base effects working through those things," Carnell said.
Reference: Reuters
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