Mainland-listed firms have taken a beating from the stock market downturn, with the value of their equity investments dropped, adding to fears of worsening corporate performance.
About 850 firms, or 27 per cent of those traded on the Shanghai and Shenzhen stock exchanges, invested in other listed companies, according to data provider Wind Information.
About 70 per cent of the companies have run up paper losses this year as a result of a 22 per cent market decline, Wind said.
The preliminary finding is in line with predictions by analysts that mainland-listed companies would face rough weather in the coming quarters amid a global slowdown. Firms that have reported a quarter-on-quarter profit decline will have to brace for an even worse earnings environment in the coming months.
In the third quarter, listed A-share companies reported their first quarter-on-quarter profit drop since September 2008. Combined earnings fell 6.1 per cent in the second quarterto 477.4 billion yuan (HK$583 billion).
'The worst is yet to come,' said Citic Securities analyst Cheng Weiqing. 'The market outlook looks awfully pessimistic now that the fundamentals are set to worsen.'
The Shanghai Composite Index has lost 22.9 per cent this year, following a 14.3 per cent drop in 2010. Those companies investing in other A-share counterparts will naturally see their earnings dented further, owing to equity investment losses.
