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Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Expectations of corporate earnings in the Asia-Pacific region are being split down the middle, and the division may boil down to beliefs about which monetary authorities have the firepower to spur growth, and which can at best fire blanks.

The latter group of central banks could be categorized as nursing a shared North Asian malady, if it weren't for India figuring in the list alongside Japan, China and Taiwan. Ever since first-quarter profit reports started surfacing in early April, all four economies have seen analysts downgrade earnings estimates for the countries' benchmark stock indexes by between 0.29 and 2 percent.

That's in stark contrast to Indonesia, South Korea, Thailand, New Zealand, Australia, Malaysia and Singapore, which have had profit upgrades from 0.5 percent to 12.4 percent. Again, the only reason to hesitate from describing this more fortunate group as Southern Comfort, or some such moniker, is the presence of Korea.

Upgrades Ahoy
Analysts turn upbeat on Southeast Asia's profit outlook amid pessimism about China, India and Japan
Source: Bloomberg
*Change in 12-month-forward earnings forecast for benchmark index between March 31, 2016 and May 10, 2016.

But what's behind this north-south divide? Monetary punch could be one answer.

Consider Japan. At the end of last year, economists surveyed by Bloomberg predicted core inflation to average 0.7 percent in 2016. That's now crashed to zero. As a result, even near-zero nominal interest rates have risen in real, or inflation-adjusted terms. At the same time, expectations of GDP growth have collapsed by more than half since the start of the year to 0.5 percent. The combination of relatively costlier money and relatively poorer growth means smaller corporate profits, the exact opposite of what the Bank of Japan wants to engineer. Clearly, the market believes earnings will be constrained by the futility of the central bank's monetary actions.

Driver's Seat
Expectations of central bank support to growth have varied wildly this year in Asia*
Source: Bloomberg
* Change between Dec. 31, 2015 and May 10, 2016 in consensus estimates of real GDP growth in 2016, minus real interest rate.

The opposite is true of Indonesia. At the end of 2015, consensus estimates had the economy growing at 5.2 percent in 2016. That confidence slipped a little after a weaker-than-expected first-quarter performance, and the current forecast is for 5.1 percent expansion. However, Indonesia's inflation-adjusted interest rate is now projected to decline to 2.16 percent, from the 2.94 percent estimated earlier. A growing belief that Bank Indonesia has the wherewithal to support growth with cheaper capital, without having to worry obsessively about the impact any Federal Reserve rate hikes will have on the rupiah, has boosted hopes of an earnings recovery.

When it comes to the difference between predicted `g' (real GDP growth) and `r' (real interest rates), most other Asian economies fall somewhere in between. Growth expectations have declined this year in Taiwan and India, too, while real interest rate projections have firmed. That indicates a degree of perceived monetary impotence, which isn't good for company profits.

The big exception is China. Economists' median estimate for GDP growth this year has remained stuck at 6.5 percent while cost-of-capital expectations have slid in real terms. To the extent this shows a monetary authority in control of things, it should be supportive of earnings expansion. Yet, analysts are even more pessimistic about the profit outlook for shares on the CSI 300 Index than they were at the end of last quarter. Either economists are too sanguine, or analysts are excessively bearish.

As one side gives in, the gap will narrow. The divergence between north and south Asia, though, might prove more durable.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Andy Mukherjee in Singapore at amukherjee@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net