China is the only bright spot as Asian companies outside Japan delivered a 14 per cent stinker, according to analysts at Wall Street banks. Companies in Greater China are pacing a recovery as downgrades subside, with Hong Kong showing the best improvement. Some 56 per cent of Chinese companies exceeded market expectations with their report cards in the final quarter of 2022, Goldman Sachs analysts including Timothy Moe said in a report on Friday, surpassing the 17 to 50 per cent range seen in South Korea, Australia and Thailand. In all, onshore companies reported 19 per cent sequential earnings growth in the fourth quarter, outpacing their peers in all major markets in the region, while a 7 per cent expansion in revenue was also the best. The analysis was based on the fourth-quarter report cards from 401 companies in the MSCI Asia-Pacific outside Japan Index thus far, who account for 58 per cent of the index capitalisation. The big picture is a letdown, with 25 per cent exceeding consensus and 59 per cent trailing, resulting in a median negative surprise of 14 per cent. “The recovery is definitely in place, said Willer Chen, senior analyst at Forsyth Barr Asia in Hong Kong. “Investors may need to see a sustainable recovery, beyond just the [post-pandemic] pent-up demand, plus more pro-growth policies in the Two Sessions.” The early momentum among Chinese companies is a relief for investors hitching on the China recovery story. More companies, including JD.com, Contemporary Amperex, China Unicom and Budweiser will release their reports next month, while the economy waits for consumers to unleash their US$874 billion of excess savings. Can US$874 billion of excess savings help propel Chinese consumer stocks? Benchmarks tracking Chinese stocks at home and in Hong Kong have rocketed by up to 51 per cent from their lows in October, before sliding off from the peak on January 27, according to Bloomberg data. A sustained recovery is needed to attract more fund inflows, some argued. E-commerce giant Alibaba Group, the owner of this newspaper, last week reported better-than-expected results in the quarter to December 31, with adjusted profit growing 12 per cent. Hong Kong Exchanges and Clearing, the city’s bourse operator, meanwhile, recorded its best-ever fourth-quarter results as Beijing’s zero-Covid pivot fuelled trading volume. Profit downgrades involving Chinese stocks have slowed this month, quantitative strategists at Bank of America noted in a February 22 report. The revision ratio has risen to 0.9 from 0.66 from a month earlier, while Hong Kong improved the most across Asia with the ratio climbing to 1.35 from 0.55 in January, they said. A reading above one indicates that more upgrades than downgrades in profit forecasts. “The sustainability of the corporate earnings outlook may rely on the trajectory of inflation and the policy response from central banks,” they added. “Our analysis suggests remaining cautious until signs of a trough in the global cycle emerge.” That caution followed renewed geopolitical tensions stoked by “spy balloon” incidents and lingering concerns about the outlook for US interest rates . Global investors sold 4.1 billion yuan (US$594 million) worth of A-shares last week, the biggest weekly selldown so far this year and narrowing the net buy this month to only US$1.8 billion, according to Stock Connect data. The recent market correction has prompted investors to question the durability of the reopening-led rally and seek potential catalysts that could drive the market higher, Goldman strategist Kinger Lau said in a report. The results from Chinese companies will be “important inputs to frame investors’ growth views on China,” he added.