Chinese listed companies posted their fastest profit growth of the year in the third quarter, as a government-led drive to cut excess industrial output drove up margins and the nation’s tech self-reliance bolstered demand for semiconductors.
The earnings of mainland-listed companies rose 11.6 per cent from a year ago, compared with a 1.2 per cent increase in the second quarter and 3.2 per cent growth in the January-March period, according to China Merchants Securities. Technology companies led the surge, while commodity producers and financial companies saw evident improvement in earnings, the brokerage said.
The positive reading on the quarterly results is expected to add support to a solid run in Chinese stocks that has been fuelled by the migration of bank savings to risk assets and hopes that Beijing will ramp up efforts to overcome deflation. A recovery in earnings growth is critical to the stock rally, particularly after valuations have expanded amid rising risk appetite among investors.
“Looking forward, corporate earnings will continue to get support from tech self-reliance, the anti-involution campaign [of reducing excess output] and a detente in China-US tensions,” said Zhang Xia, an analyst at China Merchants Securities. “The TMT [technology, media and telecoms] and resource sectors are expected to maintain relatively fast earnings growth, and the non-financial sector is also expected to benefit from a low base in the fourth quarter.”
Mainland-listed companies were required to disclose third-quarter results by the end of October, according to exchange rules.
