Investors get more reason to grumble

Some 846 mainland-listed firms book a meagre 1.7pc combined profit rise, only adding to poor market sentiment - and analysts say worst is to come

PUBLISHED : Tuesday, 14 August, 2012, 12:00am
UPDATED : Tuesday, 14 August, 2012, 11:44am


Mainland-listed companies are reporting lacklustre earnings for the first half of this year, a development likely to further depress a confidence-stricken domestic stock market.

As of yesterday, 846 companies listed in Shanghai and Shenzhen posted combined net profits of 132.8 billion yuan (HK$162.56 billion), up a scant 1.74 per cent from a year earlier, according to the official China Securities Journal.

The growth was in stark contrast to the 22.4 per cent year-on-year profit rise reported by 2,272 listed firms for the first half in 2011.

Analysts predict the worst is yet to come, with some of them estimating that the listed companies will post an overall 10 per cent profit drop for the first six months.

Mainland-listed companies are required to report interim earnings between July 1 and August 31.

Normally, loss-making firms and those due to report severe profit declines would publish their earnings reports at the end of August.

Investors, wary of an economic slowdown and weaker corporate results, have continued to trim their holdings despite encouragement from the mainland's top securities regulator, China Securities Regulatory Commission (CSRC) chairman Guo Shuqing, to buy blue-chip stocks.

Guo effectively promised investors an 8 per cent annualised return.

Analysts said those remarks by Guo, who took office at the CSRC in late October last year, reflected the regulator's desperation to bolster the weak market.

"Worries of bad interim earnings are still weighing on investors," said Shenyin Wanguo Securities analyst Li Xiaoxuan.

"No one appears optimistic about the market outlook."

Most of the mainland's blue-chip stocks are the major state-owned companies, which enjoy a cosy monopoly.

However, the China Securities Journal said the 87 major state-owned enterprises that have published interim earnings so far posted a 7.4 per cent drop from a year ago.

The benchmark Shanghai Composite Index ended at 2,136.09 points yesterday, 2.9 per cent shy of last year's close.

Guo also has been actively calling on the state-owned giants to increase cash dividend payouts to shore up investor confidence.

But the poor first-half earnings will make it difficult for the companies to do so.