China-listed companies show better 2001 H1 results; H2 prospects weak
For the first half of this year, the earnings per share for domestically listed Chinese companies averaged Rmb 0.1025, up 3.2% on-year, while average return on equity was 4.1% compared to 5.0% a year ago, according to research from investment bank CLSA.
ôThe improved quality of companiesÆ earnings is likely to be overshadowed in the second half by losses on listed companies' stock market investments,ö commented Erwin Sanft, CLSAÆs head of China research.
101 companies out of a total of 1,151 domestically listed company, 8.8% of the total, reported a loss in the first half of this year.
Just 53 companies paid out an interim dividend.
Machinery, equipment and instrumentation had the highest number of loss-making companies.
Social service companies enjoyed the best net profit growth and ROE improvement while the construction sector suffered the biggest on-year decline.
The oil, utilities, finance and Information Technology sectors were the most profitable sectors, while property and wholesale/retail were the least profitable industries, the report said.
An increasing number of companies had their interim results audited, 31.9% for the first half of this year, compared to 30.9 in the first half of last year.
However, many experts say the listed companies use æwindow-dressingÆ techniques to inflate their profit figures.
The results are unlikely to reverse the recent slump in the Shenzhen and Shanghai bourses.
The Shenzhen and Shanghai bourses have slumped 14% and 11% respectively year to date after the authorities clamped down on illegal stock investing from the banking sector in the form of credit loans to SOEs and listed companies, which then play the markets. Scandals have also rocked the markets with companies issuing inflated profit reports, hurting sentiment, as has the governmentÆs share sell-off to raise funds for its fledgling social welfare scheme. The government holds an average 60% stake in listed companies.
Over 100 companies have applied to list to issue new shares this, but the government is matching the amount they issue to the amount of 10% of its existing old shares.
Many investors complain that the state is selling its shares at an artificially high price, and that liquidity will suffer as the proceeds will be used to pay social-security needs or invested in government bonds.