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Chinese listed companies’ earnings may buffer stock skid as profit growth set to pick up

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Chinese listed companies’ third-quarter reports may offer a cushion for a sell-off in stocks triggered by a flare-up of tensions between Beijing and Washington, as earnings growth is set to continue its rebound owing to a campaign to cut excessive output and strong export momentum.
Companies on the CSI 300 Index likely posted an average of 5.4 per cent profit growth last quarter, according to data compiled by Bloomberg. That compares with an average increase of 1.8 per cent by the 300 biggest mainland-listed companies in the first half and a 2.5 per cent growth for all stocks trading on the Shanghai and Shenzhen exchanges in the period.

Earnings surprises may come from technology, high-end manufacturing and commodities that benefited from price increases, according to brokerages, including China Merchants Securities and Guotai Junan Securities.

The earnings season for Chinese listed companies kicks off this month, with all firms required by the exchanges to disclose third-quarter reports by the end of October. Investors are scouring for companies that will deliver solid earnings to hedge against the increased market volatility triggered by the US’ tariff threat and China’s tightening of rare earth exports. The CSI 300 dropped more than 4 per cent from a high set on October 9 through Friday.

Some macroeconomic data, like surging industrial profits, may have already heralded a slight improvement in the quarterly profits. Photo: Xinhua
Some macroeconomic data, like surging industrial profits, may have already heralded a slight improvement in the quarterly profits. Photo: Xinhua

“During the earnings season, corporate results typically have a pronounced impact on stock prices,” said Fang Yi, an analyst at Guotai Junan in Shanghai. “We are now in the window of third-quarter earnings, and it would be a wise strategy to identify those niche industries with earnings advantages amid the wilder swings in the market.”



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