Here are the Asia bank earnings to watch after Wall Street results fuel optimism

Will Asian banks follow Wall Street upward?

That’s the question in focus this week after American banking behemoths including Bank of America, Morgan Stanley, JPMorgan Chaseand Citigroup beat analysts’ expectations in the second quarter, sparking anticipation about whether the similar upswing will extend to Asia.

Rising interest rates that caught smaller lenders off guard are proving a boon for some larger banks. Standard Chartered, United Overseas Bank and ICICI Bank may see a continuous boost in lending business in their results next week. While the Fed is expected to raise interest rates by a quarter of a percentage point this month, investors have increased bets that it might be the last rate hike in this tightening cycle after a step-down in price pressures last month.

The end of the rate-hike cycle could bring structural weakness in the dollar, which can redirect capital flows back to emerging markets in Asia, according to Bloomberg Intelligence analysts Marvin Chen and Sufianti.

“Fund flows suggest rotation within Asia as investors gravitate toward new growth areas such as AI, with South Korea and Taiwan on the cusp of earning inflections heading into 2024,” they added. Memory chipmaker SK Hynix is set to report earnings next week, with its chairman expecting the semiconductor industry is likely to turn around in six months to one year.

Asian stocks to watch out for

Saturday: India’s second and third largest private sector lenders ICICI Bank and Kotak Mahindra Bank will report earnings over the weekend, and are expected to see strong net income growth. Because of a lag between the repricing of loans and deposits, the banks have been able to cash in lending margins comfortably above 4 per cent. With benchmark lending rates having peaked, bank margins appear to have as well, but since the Indian central bank is not expected to cut rates for the next couple quarters, it’s likely that these high margins will sustain for some time. Slippages, or the amount of loans turning sour, are also expected to be under control at both banks, according to analysts Nitin Aggarwal and Disha Singhal of Motilal Oswal Financial Services.

Monday: Posco Holdings will announce detailed second-quarter earnings during trading hours in Seoul. The South Korean steelmaker released guidance of KRW1.3tn in operating profit, representing a 38 per cent decline from a year earlier, slightly stronger than expected despite a weaker won and the rising cost of imported raw materials. The company is likely report a 9per cent rise in Ebitda on quarter, driven by an upswing in steel product sales and ramped-up overseas business thanks in part to economic recovery in India, BI analyst Yi Zhu said. Second-quarter sales increased from a seasonal demand pickup and normalisation of steel plants after heavy rain last year, despite a shortfall in roll margin, according to Meritz Securities.

Tuesday: Contemporary Amperex Technology is expected to beat estimates on Q2 net income with higher battery sales and stable margins. Demand for batteries have increased as China’s new-energy vehicle sales picked up pace after a slow Q1, BI analysts Joanna Chen and Steve Man said. Falling lithium costs and greater volume could power a faster margin recovery for the Chinese battery maker, they added. CATL earlier extended its lead as the world’s largest electric-vehicle battery maker, with a 36.3 per cent global market share as of end May this year.

Wednesday: SK Hynix is expected to see a significant dip in the second quarter sales from a year earlier, while it may see flat or slight sequential growth. Its operating loss is likely in-line with consensus, according to BI. The earnings result could mirror ongoing supply glut and lackluster demand in dynamic random access memory and NAND flash memory. The company may deliver operating loss of 2.6 trillion won, according to Ebest Investment. SK Hynix’s weak second quarter earnings also likely reflect the results of chip manufacture peers Micron and Samsung.

*The world’s top iron ore producer Rio Tinto may post a rebound of about 17 per cent-22 per cent in its first-half Ebitda, helped by higher received iron-ore prices following a strong first-quarter. Rio’s strategies in its China market will be in focus, amid investor concerns over the country’s disappointing economic recovery. Rio said that Chinese steel demand has encountered persistent headwinds, and expects ongoing weakness in China’s property sector to continue dragging on growth. Chinese buyers make up the bulk of Rio’s revenue.

Thursday: UOB may face weaker margins in its second-quarter earnings amid modest loan growth and elevated funding costs, CGS-CIMB analysts Andrea Choong and Lim Siew Khee said in a note. UOB’s trading and investment income could stay relatively strong, given that the market environment is still conducive. The lender may raise its net interest margin guidance slightly if the Fed hikes rates at the July 27 meeting, the analysts said. Contributions from credit cards will likely lift UOB’s fee income, following its recent tie-up with Taylor Swift’s concerts in Singapore and the acquisition of Citigroup’s consumer assets in Southeast Asia.

*Singapore Airlines Q1 net income will likely be closer to the upper end of previously guided range of S$650m to S$750m, UOB Kay Hian analyst Roy Chen wrote in a note. Strong passenger operation is expected to to drive its near-term earnings performance and offset the weaknesses in cargo operations, with passenger load hitting record levels at 90.6 per cent in June this year, he added.

*Samsung Electronics reported its worst quarterly revenue decline since at least 2009 early this month, fueling uncertainty over when a year-long slump in demand for electronics and memory chip will come to an end. The firm is expected to announce full quarterly earnings on Thursday.

Friday: StanChart net interest margin trajectory will remain a highlight for their Q2 results, with some 200 basis points rise in Hibor rates since end March supportive for its outlook after a 5 basis points increase in Q1, BI analysts Tomasz Noetzel and Lento Tang said. Consensus forecasts StanChart’s adjusted profit will grow about 20 per cent this year, with the bank’s shares showing resilience due to solid liquidity and capital positions ahead of results, according to BI analysts Francis Chan and Peter Lau. Earlier, StanChart and other Britain’s top lenders got a clean bill of health in the Bank of England’s latest stress test, with no firm being required to strengthen its capital position.

Read: FAB’s quarterly profit up 61% on higher rates