China’s listed companies saw ‘generally strong’ profit growth in recent quarter
Earnings growth for mainland Chinese companies listed in Shanghai or Shenzhen barely slowed in the first quarter, giving some reprieve to embattled stock markets grappling with the threat of a trade war and elevated valuations of large companies.
Shares on the nation’s two stock exchanges, denominated in yuan, or class A, posted a 16.7 per cent increase in profit for the three-month period through March, according to China Merchants Securities. That compared with full-year growth of 18.8 per cent in 2017.
The slowdown by no means signalled a reversal in earnings growth for Chinese publicly traded companies, as return-on-equity, a gauge of corporate profitability, was still on the rise, said Xun Yugen, a strategist at Haitong Securities in Shanghai.
“The earnings numbers were generally strong,” he said. “The slowdown in growth was normal and mainly due to the fluctuation in the comparable base. The absolute growth number was still pretty high.”
Return-on-equity stood unchanged at 10.3 per cent over the past 12 months, according to Haitong. The metric rose by 0.2 percentage point to 9.1 per cent in the period, when excluding financial companies that may distort the data due to a heavy weighting in major indexes.
Sectors enjoying the strongest profit growth in the first quarter were concentrated in consumer services, information technology and medical services, while resource producers and mid-stream manufacturers were the dominant last year, according to China Merchants Securities.
Meanwhile, investors in stocks have been scathed by a 6.2 per cent decline on the benchmark Shanghai Composite Index so far this year. The gauge rose 0.6 per cent on Thursday as a US delegation arrived in Beijing to start trade talks with Chinese officials,
The SSE 50 Index of the 50 most valuable stocks on the Shanghai bourse, including Kweichow Moutai and Ping An Insurance Group, is now valued at 10.6 times reported earnings after trading at a two-and-a-half year high of 12.8 times in November, according to Bloomberg data.
Smaller companies on the ChiNext saw profits rebound 37.3 per cent in the first quarter, up from 2.1 per cent growth in 2017.