Chinese ‘white horses’ issue surprise profit warnings before earnings season kicks off
- Donkey-hide gelatin maker Dong-E-E-Jiao and Han’s Laser tumble by the daily limit after saying first-half profit probably fell by at least 65 per cent
Chinese stock traders are bracing themselves for bad news during the upcoming earnings season after two “white horses” caught investors off guard with their profit warnings.
Dong-E-E-Jiao, a Chinese traditional pharmaceutical company, that had posted profit increases for 12 consecutive years, and Han’s Laser Technology Industry Group, once a favourite among foreign investors, said in exchange filings that first-half earnings may have dropped significantly.
Both stocks plunged by the 10 per cent daily limit in Shenzhen on Monday.
Equity traders will be closely watching the earnings of some 3,678 companies listed on the Shanghai and Shenzhen exchanges. The results, which will be released until the end of August, are crucial to revive a rally that had made the Shanghai Composite Index the world’s best performing benchmark earlier this year. The index’s ranking has slipped beyond the top 10 as the momentum has weakened after a gain of as much as 31 per cent.
Dong-E-E-Jiao, a maker of donkey-hide gelatin, said that profit for the first six months probably fell between 75 per cent and 79 per cent from a year earlier. The Shandong-based company cited increased production capacity, reduced expectations for product prices and destocking by downstream customers.