Asia Earnings Week Ahead: Alibaba, Tencent, Japan’s Megabanks

(Bloomberg) — Asia’s key earnings may deliver a mixed bag this week, with Chinese retail giant Alibaba expected to widen its profit margin while Japan’s three biggest banks may be left nursing larger paper losses on foreign bond holdings.

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The Japanese megabanks will detail their earnings performance on Monday, and analysts expect tepid results weighed down by sluggish lending growth. The Nikkei newspaper reported Sunday that between them, the three banks’ total unrealized losses from foreign bonds will likely reach the largest amount since March 2015. This week concludes the bulk of Japan’s earnings season, which so far has revealed a marked divergence between firms beating expectations in an increasingly challenging global environment and those falling short.

Later in the week, Tencent and 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 been casting a shadow on the country’s long-term outlook. Alibaba, reporting its second-quarter earnings on Thursday, probably witnessed its first Ebita margin expansion in three years after paring losses at local consumer services and in Southeast Asia, according to Bloomberg Intelligence. The retailers’ earnings come on the heels of the Singles’ Day shopping event, which Citi analysts described as having been disappointingly flat for Alibaba and surprisingly positive for JD.com.

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For more on what’s going on in other regions, see the US Earnings Week Ahead or the EMEA Earnings Week Ahead, and see the ESG Stock Watch for a selection of the environmental, social and governance themes that may come up on earnings calls.

Highlights to look for this week:

Monday: Japan’s three megabanks will report earnings on Monday after market close in Tokyo. No particular fireworks are expected in the second-quarter reports. Market participants will be watching how the lenders are moving toward their full-year targets. Mitsubishi UFJ Financial Group (8306 JP) is targeting net income 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 and 540 billion yen respectively. With interest rates in the US skyrocketing while the Bank of Japan is stubbornly pinning yields to near zero, all eyes will be on ballooning paper losses on the lenders’ foreign bond holdings. Meanwhile, analysts expect MUFG to embark on another share buyback program this quarter.

Tuesday: No major earnings expected.

Wednesday: Tencent (700 HK) will report third-quarter earnings after market close. It logged its first revenue decline last quarter and investors are keen to see whether the downtrend will continue. Third-quarter revenue is expected to decline 0.4% from a year earlier, according to Bloomberg Consensus estimates. Wall Street analysts slashed their price targets by the most in months and shares dropped to the lowest level in five years last month. Onshore and offshore gaming businesses face pressure and growth has been weak during traditionally peak summer season, according to CICC. Further comments on divestment of its equity portfolio are also in focus as the Chinese giant has long been expected to reduce its investment in response to Beijing’s antitrust rules.

Thursday: Alibaba (BABA US) is due in Asia’s evening. The Chinese e-commerce behemoth could report its first year-on-year expansion in adjusted Ebita margin since 2019, thanks to narrower losses expected at its online food delivery platform Ele.me and its Southeast Asian arm Lazada, BI wrote. Analysts are expecting sales to have grown by 4.3% in the fiscal second quarter — down from the 29.4% gain seen in the same period last year — mirroring revenue concerns raised by JPMorgan when it cut the price target in September.

Friday: JD.com (JD US) reports after the market close in Hong Kong. Third-quarter results from China’s second-largest online retailer follow Singles’ Day and peer Alibaba’s earnings, with Bloomberg Consensus projecting the highest gross margin in two years. Improved product mix and platform fees could compensate for higher fulfillment expenses stemming from China’s mobility curbs, BI wrote. Nevertheless, potentially weaker business sentiment in the country could drag down service revenue contribution in the current quarter, BI added.

–With assistance from Crystal Chui and Sophie Jackman.