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A spillover of China’s real estate market pressure to other regions in Asia will slow down the region’s earnings and returns, said Goldman Sachs in a note.
“We lower our 2023 regional earnings growth forecast” from 0 to -2% taking into account revised China estimates due to property risks as well as the nation’s linkages to Asia, it said. “This includes reducing earnings in Australia, Hong Kong, and Malaysia.”
The bank lowered the forecast of corporate earnings growth in Australia, Hong Kong and Malaysia in 2023 from zero to 2% fall.
Goldman cut the 12-month target for MSCI Asia Pacific ex Japan index from 580 points to 555 points, which implicating a 10% potential upside from the closing price on Thursdday.
It also slashed its 3-month target for the MSCI Asia Pacific ex Japan index from 540 points to 505 points and its 6-month target from 560 points to 530 points.
The index currently trades around 504 points and is down nearly 0.3% for the year.
Earlier this week, the bank’s analysts cut their full-year earnings-per-share growth estimate for MSCI China to 11% from 14% and reduced their 12-month index target to 67 from 70.