More than half of the listed companies that have released their interim statements have reported a year-on-year growth in first half net profit, with property developers and manufacturers the top performers.

According to financial data provider Wind Info, 251 listed companies have released their interim financial statements till August 5, and nearly 131 of them recorded increases in net profit, while 32 saw profit growth in excess of 100 percent.

"The financial performance of listed companies' has so far been to our expectations. Since the economic fundamentals have largely improved in the second quarter, listed companies' businesses have also bottomed out in the period," said Dong Chen, head of the research department of Southwest Securities.

With the country's property sector experiencing a strong rebound in the second quarter, many listed real estate firms saw remarkable profit growth during the first half.

Vanfund Real Estate Co Ltd, a Beijing-based property developer, for instance, reported a net profit growth of 13,516 percent year-on-year and topped the list.

Some other property developers like China Merchants Property Development Co, Poly Real Estate Group and Gemdale Corporation, have already exceeded their full year sales targets.

Besides real estate sector, other cyclical industries, such as electric power, steel and nonferrous metals also witnessed a rebound in the first half.

Net profits of five electric power companies have soared, with some of them even reaching the record highs of 2007. Companies in the nonferrous metals sector, usually regarded as the barometer of the macro economy, have all come out with impressive earnings numbers.

According to Dong, the buoyant performance of the listed companies can easily provide cushion to the existing stock index. The benchmark Shanghai Composite Index has gained 85 percent so far this year, becoming the second best performing market in the world.

Though the static price per earning ratio (P/E ratio) of some industries looks pretty high, such as those managing nonferrous metal business, their dynamic P/E ratio is still acceptable, given the potential price hike in the second half.

A number of economists said China's consumer price index, a main gauge of inflation, may turn positive in the fourth quarter.

Some industries, such as financials and machine manufacturing, may still see their P/E ratios at comparatively low levels.

"We believe listed companies' financial performance will be more encouraging in the second half of the year, due to improved economic environment at home and from abroad," said Dong. "The recovery of some key industries, such as financials, steel and petrochemicals is certain in the following months," he said.

(China Daily August 6, 2009)