More Corporates in the Red?

Bloomberg data showed that more corporates slipped into the red than those that turned profitable. About two-thirds of the results were a disappointment (as suggested by Pong Teng Siew, Inter-Pacific Research Sdn Bhd). Capital expenditure was held back, uncertainties of Government’s stance on economy, infrastructure and consumer spending remaining cautious.

According to Bloomberg data, 78 companies had slipped into the red, or 12% of those that released their financials.

            Earnings Performance

                (Year-on-Year)                   No. of Companies

o   Declining profit                      199

o   Widening net loss                   67

o   Slipping into red                     78

            Source: Bloomberg

Third quarter results which should be available soon may show an improvement because of the impact of zero-rated GST. But uncertainties of U.S.-China trade war could negate earnings of others. Property, plantation and construction stocks are likely to be impacted. Financial institutions remain positive, although a general slowdown may increase impairment.

Against this backdrop and a general sentiment of lower GDP growth of 4.7% in 2019, is where the Minister of Finance’s budget for 2019 is keenly awaited. Stimulus on the basis of higher tax revenue without any increase in borrowings will be the “trapeze act” that the PH government will have to play!

Reference

2Q Earnings A Disappointment by Billy Toh, The Edge Financial Daily (3 Sept 2018)