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China stock market
BusinessMoney

Coronavirus triggers China’s weakest corporate earnings in a decade. The worst may be over

  • Profits for more than 3,000 companies on the mainland’s exchanges dropped 42 per cent from a year earlier in the first quarter, according to Soochow Securities
  • Interim results may still face challenges as Covid-19 dampens listed companies’ overseas sales, Ping An Securities says

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Men wearing face masks take a rest while visiting the promenade on the Bund along the Huangpu River in Shanghai during the May Day holiday. With optimism and a heavy dose of caution, millions of Chinese hit the road or visited newly reopened tourist sites during the national holiday. Photo: AFP
Zhang Shidong
Chinese companies posted their weakest corporate earnings in a decade in the first quarter after the coronavirus outbreak shuttered factories and lockdown measures curtailed consumer spending. The worst may be over, according to Citic Securities, the nation’s biggest brokerage.
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Profits for more than 3,000 companies listed on the Shanghai and Shenzhen exchanges — excluding those in the banking and petroleum sectors — fell 42 per cent on average from a year ago, according to Soochow Securities. Apparel manufacturers and transport-related companies suffered the most during the health crisis, it said.

The decline in earnings was only 24 per cent when companies in the two dominant industries were taken into account, analysts at the brokerage said in a report published on Tuesday.

The viral outbreak, first reported in Wuhan in central Hubei province in January, brought the nation to near a standstill after lockdown measures to contain the Covid-19 disease. The world’s second-largest economy shrank 6.8 per cent last quarter, the worst since the end of Cultural Revolution in 1976.

Some of the biggest setbacks included a 43 per cent drop in profit reported by Ping An Insurance and a 50 per cent slide in earnings at dairy producer Inner Mongolia Yili Industrial Group.

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While the almost 4 per cent decline this year in the CSI 300 Index — which tracks the biggest companies in both exchanges — suggests investors have shrugged off the weak report card, analysts remain divided on how much earnings and share prices will rebound as China begins to restore productive capacity in the economy.
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