Two-year corporate earnings recession could finally be over

Market EPS could expand 7.7% in 2017 but risks remain.

UOB KayHian is hoping for an end to earnings recession after 2 years. However, it remains cognisant of potential downside.

"After two years of corporate earnings recession in 2015-16, we are hopeful for a recovery in 2017 earnings. Driving the recovery will be sectors such as plantation, telecommunications and aviation," it said.

From the low base in 2016, where it forecasts market earnings per share (EPS) to decline 10.1%, it projects market EPS to rise 7.7% yoy in 2017.

Nonetheless, the research house cautions for another challenging period ahead.

"We see 2017 as another challenging year, plagued by a weak growth environment (primarily on weak global demand), gradually rising interest rates, and structural changes and disruption from new technologies," it said.

UOB KayHian adds that the unexpected election of Donald Trump as the new president of the United States could also add more uncertainties in terms of government policies.

"On this basis, FSSTI’s valuations are likely to remain at a discount to long-term mean as ROEs and EPS growth momentum are expected to be lacklustre," it said.