Chinese Listed Companies Expected to Report Lower Earnings in Second Quarter

Chinese listed companies are anticipated to report lower earnings for the second quarter, reflecting weak consumer spending and insufficient demand. The upcoming earnings release expected by the end of August may further strain the stock market, which has been struggling to maintain momentum despite earlier interventions by the state. Analysts express concerns about the potentially disappointing reports and their impact on already fragile market sentiment.

As of now, the Shanghai Composite Index has witnessed a 0.2 per cent decline, contributing to a total drop of over 6 per cent from the peak reached in May. Zhang Xia, an analyst at China Merchants Securities, noted that there is limited room for improvement in the interim reports, leading to growing pressure in the market. Initial guidance and results disclosed by companies do not augur well for the upcoming second-quarter reports, with only 40 per cent of listed companies providing positive guidance as of last week.

Experts suggest that industries with exposure to international markets, such as appliances, textiles, and automobiles, are likely to present positive profit outlooks. In contrast, property developers, financial firms, and building materials manufacturers are expected to weigh down overall profit growth. Leading financial institutions like Barclays, Goldman Sachs, and JPMorgan have revised their China growth forecasts amidst concerns over a potential deflationary trend in the country. The current stimulus initiatives have not yielded significant results to boost the property market or consumer spending, creating uncertainties in the short term.