Chinese publicly traded companies will release their earnings results for the first half of the year starting from tomorrow over a period of two months, and analysts are forecasting a rise in corporate profitability.
The Shanghai and Shenzhen stock exchanges required yesterday the 1,200-odd firms trading shares on the two bourses to issue their interim reports no later than the end of August.
If a company misses the deadline for the earnings release, the stock exchanges will suspend trading of its shares for two months, starting from September and at the same time reprimand the corporate executives.
After the trading suspension, the company will be labeled as "Special Treatment" to warn investors of its potential risk. The label is also given to companies which report losses for the past two consecutive years.
Besides, companies are required to issue a warning in the interim report, if they forecast corporate losses or more than 50 percent earnings swings for the first three quarters of the year in comparison with the same period a year earlier. These companies are required to devote a specific section in their report to explain the reason.
China's public companies are required to release their half-year earnings in July and August every year.
Although some sectors were hit hard by the SARS epidemic in the second quarter, analysts are still upbeat about the earnings outlook.
"I believe that there would be a modest increase in the companies' half-year earnings on the average," said analyst Deng Yaping of Industrial Securities Co Ltd. "Thanks to domestic spending, the strength in the steel making, auto and machinery sectors would far offset the negative fallout brought by SARS. The stocks' performance would be good enough to bolster the whole bourse."
But Deng expected the tourism and airlines stocks, which fell victim to the virus outbreak, to report a fall in profits. "But the retail sector would not be among them, because June has already seen a recovery in the retail business," she added.
The coming earnings season is crucial to 11 firms, whose shares have already been halted from trading due to losses for three consecutive years. If the 11 firms cannot return to profitability, they will be expelled from the exchange. Among them are Shanghai Zhongxi Pharmaceutical Co Ltd and IT firm Shanghai Citic Jiading Industrial Co Ltd.
Last year, the 1,204 firms that trade on the Shanghai and Shenzhen stock markets posted an average net profit of 37.94 million yuan (US$4.57 million) for the first half, down 13.62 percent from the year-earlier period.
(Shanghai Daily July 1, 2003)
