Mainland-listed companies reported a collective decline in profit for the second quarter, due in part to a weak domestic economy, though some veteran analysts believe growth could resume in the final period of the year.
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Profits for the 5,350 companies trading on the Beijing, Shanghai and Shenzhen stock exchanges fell 1.5 per cent from a year earlier – and revenue dropped 2 per cent – according to Huafu Securities. That compared with a 4 per cent profit decline in the first quarter, a reversal after two periods of increases.
The lacklustre earnings season, which concluded last month, dealt another blow to investor confidence, which was already low because of a raft of disappointing economic data and a dearth of major stimulus measures. The latest macroeconomic reports showed China’s deflationary trend has persisted, the manufacturing industry shrank and the services sector has slowed. China’s benchmark CSI 300 Index has erased any gains made due to buying from the government earlier this year, and it is headed toward its lowest point in more than five years.
“The double declines in revenue and profit reflected the pain of China’s economic transition,” said Zhu Bin, an analyst at Huafu Securities. “Stock valuations have been squeezed over the past two years. Those sectors whose fundamentals will improve going forward will draw the attention from investors.”
The best performers sectors in the second quarter were carmakers and electronics manufacturers, which benefited from the rise of electric vehicles and a recovery in the global semiconductor industry, according to the brokerage. While food and drink companies and appliance makers recorded greater profits, their growth moderated, reflecting weak consumer demand that could linger into the third quarter, the brokerage said.