A weak Chinese economy punctuated by deflationary trends during the quarter and a squeeze on the region’s exports due to uncertain global economic conditions inflicted a $185 billion loss to the market capitalization (MCap) of the top 50 Asia-Pacific (APAC) firms during the third quarter (Q3) concluded on 30 September 2023, reveals GlobalData, a leading data and analytics company.

Companies from the financial services and technology sectors topped the list with an aggregate market valuation of $1.9 trillion and $2.2 trillion, respectively. Out of the top 50 companies, 16 belong to the financial services sector while 13 belong to the technology sector. Geographically, 23 companies are from China, followed by 10 from Japan and nine from India.

CNOOC Ltd and HDFC Bank witnessed the highest quarter-on-quarter (QoQ) growth of more than 20%, whereas AIA Group and Keyence Corp saw their MCap eroding by more than 15%.

Murthy Grandhi, Business Fundamentals Analyst at GlobalData, comments: “In the third quarter, 27 of the top 50 companies witnessed a QoQ decline in their market capitalization from $4 trillion to $3.7 trillion. Factors such as China’s descent into deflation, a sluggish domestic property market, and weakening external demand had a negative impact on both household and business confidence. The APAC region is likely to remain burdened by weak global demand, expensive funding, persistent or uncontrolled inflation and rising crude oil prices in the foreseeable future.”

CNOOC Ltd surged in response to its strong first-half performance in 2023, marked by six new discoveries and successful appraisal of 14 oil and gas structures, all amid the backdrop of increasing crude oil prices.

Indian banking major HDFC Bank saw its market capitalization surge by 20.3% to reach $139.4 billion, propelled by the robust growth of 15.7% in total advances and 19.2% in deposits. This impressive performance was further fueled by the positive results across all segments, a diversified fee income mix, and strong asset quality throughout the various segments.

Grandhi adds: “Despite delivering positive mid-term results, AIA Group lost more than 15% in MCap due to significant sell-off from institutional ownership, who held over 54%. The company, cashing on it, bought back 1.94 million shares.

Keyence Corp has lost more than 15% in MCap, driven by concerns about falling earnings visibility, weak capital investment activity in Asia, and a challenging macroeconomic environment. The company’s exposure to China’s economic situation and high valuation multiples are also the contributing factors, which led to a decrease in investor confidence and a decline in the stock’s value.”

In India, Infosys and TCS witnessed a 7.5% and 6.9% growth in their market capitalization, primarily driven by favorable quarterly results. However, their stocks remained volatile due to trimmed down growth forecasts. On the other hand, Reliance Industries experienced an 8% decline in its market capitalization, attributed to stock consolidation following the Jio Financial demerger. Hindustan Unilever, meanwhile, faced a downward trend in its share price after its Q1 FY2024 results fell short of market expectations, exacerbated by the impact of rising inflation on consumer spending.

Grandhi concludes: “While volatility in global markets may persist for the rest of the year amid the challenging economic landscape, the APAC region is poised to shine. Anticipations include India firmly advancing on the path to growth, with strong support from its services and manufacturing sectors; a projected uptick in exports of nickel and copper from Indonesia as the world moves toward a net-zero future, and improved investor sentiment for Japanese stocks as the central bank signaling a potential shift away from ultra-loose monetary policies and yield curve control.

“However, it is noteworthy that China’s economy in Q3 expanded by 4.9%, surpassing market expectations, indicating a resurgence in the economy due to the government’s supportive actions. It remains intriguing to observe if this trajectory will persist, especially in the context of ongoing China-US tensions related to geopolitics, trade, and technology and downturn in the real estate sector.”