Chinese Firms Grapple with Profit Decline Amid Economic Slowdown, Anticipate Rebound in Fourth Quarter

Second quarter sees a drop in earnings for Chinese companies; expected rebound in the fourth quarter

Companies listed in the mainland experienced a combined decrease in profit for the second quarter, largely attributed to a struggling local economy.

The recent lackluster earnings season, which ended last month, further undermined investor trust, which was already weak due to a slew of negative economic data and a shortage of significant economic boosters. The most recent economic reports revealed that China's deflationary trend continues, its manufacturing sector has contracted, and the service industry has decelerated. This year's earlier government purchases failed to sustain the gains made by China's benchmark CSI 300 Index, which closed at its lowest level since January 30, 2019, last Thursday.

"China's economic shift has resulted in a twin decrease in income and earnings," stated Zhu Bin, a financial expert at Huafu Securities. "Over the last two years, stock market values have faced pressure. However, industries that show potential for improvement will likely attract investor interest."

The sectors that performed exceptionally well in the second quarter included the automobile and electronics industries, according to a brokerage report. These sectors saw a boost from the growing electric vehicle market and the global rebound of the semiconductor industry. On the other hand, while companies in the food, beverage and appliance sectors saw higher profits, their growth rate slowed down due to the decreased consumer demand. This trend may continue into the next quarter, as per the brokerage's predictions.