H1 earn­ings:Down a tad but still solid

China Daily (USA) - - BUSINESS - By CAI XIAO caix­iao@chi­nadaily.com.cn

In­terim re­sults of the A-share com­pa­nies for the first half showed earn­ings were strong, which could shore up mar­ket this year, ex­perts said.

“A-share earn­ings growth in the first half has slowed but re­mained solid,” said Gao Ting, head of China strat­egy at UBS Se­cu­ri­ties. “Given a high base in the same pe­riod last year, we see the level of growth as de­cent, which will likely shore up the mar­ket.”

As of Aug 31, a to­tal of 2,929 A-share com­pa­nies had re­leased their in­terim re­sults for the first half. Their net earn­ings to­taled 1.38 tril­lion yuan ($206.6 bil­lion), down 4.7 per­cent year-on-year, ac­cord­ing to data from the Shang­hai Stock Ex­change and the Shen­zhen Stock Ex­change.

Chi­nese com­pa­nies listed on the Shen­zhen bourse -- most of them are small or medium en­ter­prises or SMEs -- led the A-share mar­ket with to­tal net profit of over 244 bil­lion yuan, up al­most 6 per­cent year-on-year.

For in­vestors grap­pling with an econ­omy where many sec­tors are show­ing signs of stress, there were clear earn­ings im­prove­ment in the much-ma­ligned bloated sec­tors like coal and steel.

The steel in­dus­try has swung to a profit. The fall in prof­its of con­struc­tion ma­te­ri­als firms has nar­rowed sharply, ac­cord­ing to UBS.

But the bank­ing sec­tor’s prof­its fell as lenders will likely be hit by a plan that will en­cour­age banks to con­vert loans given to strug­gling bor­row­ers into eq­uity. The swap plan is ex­pected to be rolled out within weeks.

Among lenders, In­dus­trial and Com­mer­cial Bank of China posted the largest earn­ings in the first half of 150.2 bil­lion yuan.

China Oil­field Ser­vices Ltd made the big­gest loss of 8.4 bil­lion yuan dur­ing the pe­riod.

UBS fore­cast China’s non-fi­nan­cial earn­ings will in­crease by 7.5 per­cent this year, com­pared with a 5 per­cent fall in fi­nan­cial earn­ings.

Hong Hao, chief strate­gist at BOCOM In­ter­na­tional Hold­ings Co, said pre­lim­i­nary earn­ings of A-share com­pa­nies in the first half are mostly in line with ex­pec­ta­tion. Bar­ring the fi­nan­cial ser­vices sec­tor, there is some growth.

net profit of Chi­nese A-share com­pa­nies listed on the Shen­zhen bourse, for the first six months of 2016 new loans in the first six months of 2016, up 15 per­cent year-on-year

”I think the earn­ings of A-share com­pa­nies in the sec­ond half will be flat to slightly bet­ter than the first half, as the lag­ging ef­fect from the dra­matic credit cre­ation in the first half starts to flow,” saidHong.

New loans in the first half to­taled 7.5 tril­lion yuan, up 15 per­cent year-on-year, ac­cord­ing to July data from the Peo­ple’s Bank of China.

Hong said over­all growth will be in sin­gle dig­its be­cause banks will have zero or close to zero growth.

By Aug 31, 1,095 A-share com­pa­nies fore­cast pre­lim­i­nary earn­ings for the first three quar­ters of the year. And729 of them fore­cast that earn­ings will rise.

The Shang­hai Stock Ex­change said in a state­ment that com­pa­nies listed on it pay at­ten­tion to sup­ply-side re­form and op­er­ate their busi­nesses well.

QILAI SHEN/BLOOMBERG VIA GETTY IMAGES

A fe­male cus­tomer browses mer­chan­dise at the Fast Re­tail­ing Co flag­ship Uniqlo store in Shang­haI.

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