China’s corporate reporting season for the third quarter kicks off on Monday
China’s corporate reporting season for the third quarter kicks off on Monday amid profit warnings and earnings downgrades, but analysts think the worst may be over for Chinese firms, with the last quarter of the year expected to bring back some cheer.
“I think it (earnings) should stabilize. There should be relatively fewer downgrades unless there’s a big deterioration in exports in the fourth quarter or a hit in local consumption,” said Alan Lam, China equity strategist with Bank Julius Baer in Hong Kong.
While hopes are being pinned on the last three months of the year for a revival in corporate earnings, the third quarter has already been declared a wash-out by many analysts.
In September, Goldman Sachs’ China equity strategist Helen Zhu cut her profit estimates for 2012. According to her profits at companies that make up the MSCI China Index will increase by 1.8 percent for the full year instead of the previously forecast 6 percent, affected largely by third-quarter numbers.
Chinese companies such as truck maker Jinan Truck, shampoo maker BaWang and steel products manufacturer China Oriental have issued profit warnings over the last month, saying they would either report lower profits or outright losses for the third quarter.
But analysts don’t expect more downside from here, with the economy seen to have bottomed out in the third quarter. Corporate profits should track the rebound in gross domestic product growth, they said.
China’s economy is expected to grow at 7.4 percent in the third quarter, according to a Reuters poll, its slowest pace of growth this year before picking up to expand at 7.6 percent in the last three months.
Sounds like semi-good news!