Falling earnings expectations at Chinese firms help explain the very jittery state of the equity market. Revenues at A-share non-financial firms in the first quarter fell 2 per cent year on year, the first decline since 2009 and comparing badly with an 8 per cent annual rise in the three months before. Core earnings were even worse, down 24 per cent on a year ago. Analysts have been cutting profit forecasts since the fourth quarter of last year. "The latest set of earnings confirms our view that the sharp A-share rally since mid-2014 lacks fundamental support," analysts at Bank of America/Merrill Lynch write in a new report. Markets are now projecting just 4.2 per cent earnings growth in China, down from 7 per cent at the start of the year. Energy, construction materials, technology hardware equipment, materials and real estate have had the heaviest downgrades. Diversified financials, chemicals, insurance, transport and consumer durables are seeing upward revisions.
