THERE have been warnings that H-share companies are nothing less than time-bombs and that investors should be wary of illusions that they are guaranteed to record good earnings growth. Between the 17 H-share companies, there are extremes which are poles apart. Net profit at Maanshan Iron and Steel sank 93 per cent to HK$37.25 million for the six months to June 30, but earnings at Yizheng Chemical Fibre surged 82 per cent. When the results were gradually announced in mid-August, the market was appalled and there was panic selling across the board, with only a few exceptions in the petrochemical sector. Sasoon Securities' H-share Index has fallen 16 per cent from its peak of 1,104 points in mid-July. It dropped a further six per cent following the release of the interim results. Maanshan put the blame on rising raw material prices and the need to shift to lower-margin products. The losers generally blamed China's austerity measures, introduced in July 1993, for falling profits. The measures have helped to rein in inflation with the July retail price index dropping below 15 per cent for the first time in 20 months to 14.6 per cent. The state sector was particularly hard-hit with lower profit margins, rising inventories and higher provision for bad debt and this could not be more accurately reflected than in their poor interim results. Sassoon Securities said the petrochemical sector had been able to escape the worst because of the ability of petrochemical producers to pass on their costs to end-users on the back of strong demand. With China's inflation showing signs of easing, it was widely tipped that the state's tight grip on credit control would be relaxed in 1996, possibly as early as the first quarter. If that happens, there should be a time lag of at least nine months for the impact to be reflected in results. Analysts have said the H-share companies might react to a credit relaxation to different degrees.