Mainland firms see profit growth slow to 22pc
Profit growth at mainland companies in the first half was sharply lower than last year, falling short of investor expectations and casting a shadow over the outlook for a market that has lost 8.6 per cent so far this year.
The 2,272 firms listed on the Shanghai and Shenzhen stock exchanges posted an average year-on-year growth in profits of 22.4 per cent for the six months to June, according to the Shanghai Securities News.
That compared with growth of 41.2 per cent in the same period last year and 37.3 per cent for the full year.
The outcome was dragged lower by funding difficulties that hampered the growth of small companies that bore the brunt of Beijing's monetary tightening measures.
The 600 firms listed on the SME board in Shenzhen showed earnings growth of 18.1 per cent in the first half, against 45.9 per cent previously.
The more than 250 start-ups on the Nasdaq-style ChiNext market saw growth of 22.9 per cent. But their performances failed to live up to the expectations of investors, believing the future profit stars could generate growth as high as 100 per cent.
So far, the reporting season has had a minimal impact on the market. Shenyin Wanguo Securities analyst Wei Daoke said the outlook for the remainder of the year 'all comes down to investor expectations for the second half'.
Brokerages said they expected as much as 25 per cent profit growth for this year.
The central government began tightening monetary policies last year to contain stubborn inflation growth and is expected to launch more measures because inflation has remained high. Consumer inflation hit a 37-month high of 6.5 per cent last month while the producer price index jumped 7.5 per cent.
Higher raw material costs ate into company profits, with analysts expecting to see a further slowdown in earnings in the coming months.
Small companies, unable to secure bank loans to support production and sales, were main victims of the tightening.
According to the Shanghai Securities News, the 50 largest state-owned industrial giants listed in Shanghai reported a combined profit of 624 billion yuan (HK$762 billion) - 62.5 per cent of the total earnings of A-share companies.
The fall in the Shanghai stock market in the first six months of last year, but interim profits were higher than this year