China’s bearish stock market faces more pressure from weak earnings growth forecast
Corporate earnings are becoming another factor holding back Chinese stocks, with industries ranging from consumer goods to real estate and green energy under pressure because of weak demand or excessive capacity. Profit growth through the first nine months for mainland Chinese listed companies slowed compared with the pace in the first half, according to Shenwan Hongyuan Group. The Shanghai-based…
Chinese stocks are facing additional pressure as corporate earnings growth forecasts are looking weaker. Industries such as consumer goods, real estate, and green energy are struggling due to weak demand or excess capacity. Shenwan Hongyuan Group, a Shanghai-based brokerage, noted that profit growth for mainland Chinese listed companies decelerated in the first eight months compared to the first half, with industrial companies' profits rising by 15.7% year on year, down from an 18.7% increase in the first half.
Analyst Lin Limei from Shenwan warned that third-quarter reports may show a slight drop in profit growth compared to interim ones.
The slowdown in earnings may exacerbate the challenges for Chinese stocks, following the benchmark CSI 300 Index's entry into a bear market last week because of disappointment with Beijing's stimulus measures and the US artificial intelligence trade fallout. While state-backed funds may have intervened to buy into key ETFs tied to major indexes, this has not fully restored investor confidence.
Property, consumer goods, household appliances, and parts of the new-energy sector are expected to bear the brunt of the earnings slowdown, with the agricultural industry also likely to face difficulties due to a decline in pig-farming.
Disappointing results from notable companies have already created a cautious atmosphere, with shares of Contemporary Amperex Technology Ltd (CATL) dropping 14% in Shenzhen after its profit growth in the third quarter fell more than half compared to the previous three-month period. However, the technology sector's resilience might continue into the third quarter, fueled by high demand for compute power and domestic alternatives to imported products, according to Ping An Securities.
The technology, industrial, and material companies' earnings forecasts were raised by around 5% in the past three months, compared to a 2% decrease for consumer names. BNP Paribas maintained its preference for production sectors over consumption peers for 2027, suggesting that it is too early to consider a more aggressive tilt towards consumption due to current macro trends and earnings momentum.
Written by urgent.news from SCMP Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
