Warning shot from China’s earnings season for stock bulls as UBS, JPMorgan see bumpy second-half ride

Name: Xi warns Biden that US ‘playing with fire’ as tensions soar over Pelosi’s proposed Taiwan visit
Uploaded: 2022-07-31T23:30:36.000Z
Duration: 3 min 13 s
Description: Xi warns Biden that US ‘playing with fire’ as tensions soar over Pelosi’s proposed Taiwan visit

Of the listed companies that have published their guidance so far, only 42 per cent have forecast positive interim earnings

Stock recovery from a two-year low in April at risk from downside surprises, on top of a housing market crisis and a host of macro worries

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China’s CSI 300 Index has clawed its way up from a two-year low in April. Photo: Xinhua

Zhang ShidongandYaling Jiang

Published: 7:30am, 1 Aug 2022

The corporate reporting season in mainland China is firing an early warning to investors: results so far suggest it may be worth waiting for signs of stronger recovery before playing the economic reopening theme. The second-half recovery is not a given, JPMorgan Private Bank said.

Only 42 per cent of 1,766 companies have provided positive guidance on their first-half earnings, while 58 per cent warned of weaker results from a year earlier, according to data compiled by Wind Information based on exchange filings.

The ratio is the second lowest only to the interim period in 2020 during the onset of Covid-19 pandemic, according to HSBC Qianhai Securities. The average ratio of positive guidance is 63 per cent for interim earnings between 2017 and 2021. The other 3,067 listed companies are expected to provide their earnings guidance in coming weeks and all the publicly traded companies on the mainland must publish interim results by end-August under stock exchange rules.

The scorecard puts investors with bullish bets at risk, having enjoyed an 11 per cent rebound since the CSI 300 Index clawed its way up from a two-year low in April. It comes as a test for the market trying to shake off a housing market crisis, a lack of forceful policy stimulus and wariness associated with the nation’s zero-Covid policy.

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Xi warns Biden that US ‘playing with fire’ as tensions soar over Pelosi’s proposed Taiwan visit

“The market is likely to enter a consolidation stage near term,” said Meng Lei, a strategist at UBS in Shanghai. “We expect broad-based earnings downgrades in the earnings season” into the third quarter, before a significant re-rating could follow, he added.