A robust earnings season should help Chinese stocks regain the momentum lost after the initial wave of optimism about the country’s reopening from Covid isolation, according to Goldman Sachs Group Inc.
(Bloomberg) — A robust earnings season should help Chinese stocks regain the momentum lost after the initial wave of optimism about the country’s reopening from Covid isolation, according to Goldman Sachs Group Inc.
Of all the Chinese companies reporting first-quarter results, 90% have given positive profit guidance so far, up from the historical average of about 60% to 70%, Sunil Koul, the bank’s Asia Pacific equity strategist, said on Bloomberg TV Wednesday. Most of the companies may deliver 20% earnings growth, he added.
The majority of industry leaders that have already released earnings, including battery maker Contemporary Amperex Technology Co., liquor giant Kweichow Moutai Co., China Mobile Ltd., and Wanhua Chemical Group Co., have reported stronger-than-expected results.
The encouraging earnings picture is offering investors hope after geopolitical tensions triggered a $446 billion meltdown in domestically traded Chinese stocks this month, pushing the MSCI China Index toward its worst April since 2004. The broader pressure on the country’s equities also comes as US-based active long-only fund managers have been driving selling in America-listed Chinese stocks and Asia funds are re-embracing a once-popular India-over-China trade.
The latest data “is supportive of the fact that you could see strong earnings rebound in China, which I think in the near term could lift markets higher,” Koul said. “This week and next week is most important for China because you will see the bulk of the companies reporting there.”
According to analyst estimates compiled by Bloomberg Intelligence as of April 19, aggregate profits per share for members of MSCI China are expected to rise 11% on year in yuan terms in the January-March period, the first full quarter since the country’s reopening. This comes after a five-quarter slide, including an 11% annual drop in the quarter ended Dec. 31.
–With assistance from David Ingles and Yvonne Man.
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