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  • Jul 13, 2014
  • Updated: 1:20am
Business

Analysts lower China's earnings growth forecast and cut share targets

Analysts lower earnings growth forecasts and cut stock index targets

PUBLISHED : Wednesday, 05 September, 2012, 12:00am
UPDATED : Wednesday, 05 September, 2012, 8:23am

Goldman Sachs has lowered earnings growth forecasts for China's companies and Credit Suisse has cut stock index targets as the economy slows.

Profits for companies in the MSCI China Index might rise 1.8 per cent this year and 8.6 per cent in 2013, compared with previous estimates of 6 per cent and 12.3 per cent, Goldman Sachs analysts Helen Zhu and Timothy Moe wrote in a report this week.

Credit Suisse lowered its 12-month target for the index to 60 from 70, analysts Vincent Chan and Peggy Chan said in a report.

Third-quarter "earnings growth may not yet show a clear inflection point", Goldman's Zhu and Moe wrote.

"We expect further earnings cuts … albeit at a slower rate, as current revision sentiment is very weak already."

The Shanghai Composite Index has retreated on concern two reductions in borrowing costs and bank reserve ratios this year will fail to halt a decline in economic growth.

China's economy grew 7.6 per cent in the second quarter, the slowest pace since 2009, as Europe's debt crisis hurt exports and a crackdown on property speculation damped domestic demand.

Manufacturing shrank for the first time in nine months in August as new orders contracted and output rose at a slower pace.

Earnings per share for companies in the MSCI China Index of mainly Hong Kong-listed Chinese companies rose 2 per cent in the first half, slowing from 28 per cent in the same period last year, according to Goldman Sachs.

The economy risked missing the government's 2012 growth target of 7.5 per cent, according to Lu Ting, head of Greater China economics at Bank of America Merrill Lynch.

The H-share index has slumped 7 per cent this year.

Credit Suisse lowered its target for the Hang Seng gauge to 12,000 points from 13,000, based on an assumption of "flat" earnings in the next three years. For stocks to rise, "we will need either a stabilised global economy or the Chinese government's macro policy addressing stimulus or structural reform", the analysts said.

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