Stock traders turn to corporate earnings for tonic as Tencent and index members navigate China’s regulatory minefield
- Members of the CSI 300 index probably grew their profits by 3.5 per cent last quarter, compared with 32 per cent in the preceding quarter
- Tencent is likely to be the focus on Wednesday while AIA, Geely and CNOOC will also report this week
At least 13 Hang Seng Index members and 55 of CSI 300 constituents will report to their shareholders, based on the timings of previous filings. The most interesting of the lot is on Wednesday when online-gaming giant Tencent Holdings, a target of China’s clampdown on internet platform companies, is set to report.
The signs are not too promising. Members of the CSI 300 index probably grew their profits by 3.5 per cent, compared with a 32 per cent gain in the first three months of 2021, according to data compiled by Bloomberg. The moderation also likely reflects a slowdown in the broader economy as new delta variant Covid-19 infections disrupted activity.
The 736 companies in the MSCI China Index, including offshore-listed Big Tech, probably generated 24 per cent more profits in the three months to June 30, versus 38 per cent in the preceding quarter, according to data compiled by China International Capital Corp (CICC).
“Earnings growth for upstream industries such as energy and raw materials is expected to exceed 50 per cent,” analysts led by Wang Hanfeng at CICC wrote in a report. “Some downstream sectors including consumer services and retailing probably rebounded significantly from a low base last year.”
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Tencent, the fourth-biggest Hang Seng Index member with a 6.3 per cent weighting, probably achieved an 8.9 per cent increase in earnings to 32.8 billion yuan (US$5.1 billion) last quarter, according to the consensus of analysts tracked by Bloomberg. It would rank as the slowest growth in more than a year.
The owner of China’s ubiquitous WeChat social media app may have spent more money on investments and earned less from its online gaming segment versus a year ago due to base effects, when lockdown measures led people to spend more time on mobile games a year ago, according to Guosen Securities.
Other reports of interest could be from carmaker Geely Automobile, oil producer CNOOC and insurer AIA Group.