China’s listed companies slip on profit runway as slowdown, commodity inflation squeeze margins
- Growth in profitability slowed to 25.6 per cent in the first nine months, from 43.7 per cent at the half-year interval
- Money managers have tweaked their funds to add new-energy and pharmaceutical stocks, betting on a turnaround in their fortunes
Companies listed on the Shanghai and Shenzhen exchanges reported a 25.6 per cent average growth in profit in the three months to September 30, based on data compiled by China International Capital Corp (CICC). It slipped from a 43.7 per cent pace in the first six months.
Revenue growth also slowed to 23.2 per cent in the third quarter from 26.7 per cent in the first six months, according to the nation’s biggest investment bank.
Carmakers, home-appliance manufacturers, retailers and textile companies registered the biggest decline in profitability, while earnings at petrochemical firms, metal and coal producers and steelmakers at least doubled, CICC said in a November 1 report.
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The divergence underscores how China’s runaway factory-gate inflation impacted corporate earnings, prompting money managers to adjust their funds to salvage what is set to be another rotten year for investors. The CSI 300 Index and the Hang Seng Index have both declined by more than 7 per cent this year.
“It is a reflection of surging raw-material prices squeezing profits of mid- and downstream industries, particularly against the backdrop of relatively inadequate demand,” said Ai Xiongfeng, an analyst at Sinolink Securities.