For anyone checking the health of China’s economy, corporate earnings are providing the latest bad news.
Of the more than 1,600 firms to give first-half guidance, 40 percent have predicted a drop in earnings from a year earlier, according to data compiled by Bloomberg.
That is the most since 2016 in terms of companies reporting smaller profits, deeper losses or swings into loss.
Chongqing Changan Automobile Co (重慶長安汽車) expects to swing to a loss of as much as 2.6 billion yuan (US$378 million) on declining sales.
Shenyang Machine Tool Co (瀋陽工具機) blamed China-US trade tensions for an expected 1.5 billion yuan first-half loss after reporting a profit a year earlier.
Shares of Dong-E-E-Jiao Co (東阿阿膠), a maker of traditional Chinese medicine, had their biggest two-day drop since 2015 after preliminary earnings showed a 79 percent slide in the first half.
The warnings indicate that pain is spreading across the economy after domestic output expanded at the slowest pace on record in the second quarter.
A gauge of China’s factory activity has shown a contraction in every month, but two this year, although data yesterday showed a slight improvement last month from the previous month.
While more than half of companies expect earnings to improve, the warnings follow a flood of alerts issued earlier this year on last year’s profits.
Consumer discretionary and media companies are poised to suffer the most, with combined profits in the two sectors plunging at least 38 percent from a year earlier.
“The sluggish broader economy has left many firms in a bad state, and they are unable to reverse the situation at the moment,” China Vision Capital Management Co (中國華新資本管理) president Sun Jianbo (孫建波) said.
The worst might be yet to come as the deadline for Chinese companies to report their earnings for the first six months approaches this month.
Firms that give guidance early in the season tend to have relatively better figures than those releasing later, Pacific Securities Co (太平洋證券) said in a note earlier this month.
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