Pulse on China's economy: Listed firms report improved Q3 financial results, as experts hope for a significant A-share market rally in 2024
Published: Oct 30, 2023 08:19 PM
A view of Guangzhou, South China's Guangdong Province Photo: VCG

A view of Guangzhou, South China's Guangdong Province Photo: VCG

More listed firms in China have published their third-quarter financial performance reports, which indicate a broad improvement from the second quarter with the nation's economic recovery gaining rising momentum.

The public companies, which have become a major base of China's economy, are reporting resilience in growth, backed up with more innovation-driven capabilities in digital and green exploration. These firms have contributed to the country's increasingly modern industrial system, despite the complex external environment in the world, experts said.

To date, 2,440 listed firms have unveiled their third-quarter earnings results, accounting for nearly half of the total public companies. Among them, 2,067 companies made profits while 373 companies reported business loss. Those companies raked in 21.31 trillion yuan ($2.9 trillion) in total, an increase of 3.49 percent year-on-year, and the total net profit reached 1.63 trillion yuan, up 0.43 percent from a year ago.

Sci-tech innovation

Companies listed on the Shanghai Stock Exchange's sci-tech innovation board saw rapid growth in both business revenue and profit. Among the 208 firms that have published their earnings, nearly 70 percent registered growth in the first three quarters of the year, and about half of them achieved profit growth, with some attaining 30-40 percent annual growth. 

In breakdown, the financial performance of the listed companies in the fields of consumer goods, biomedicine and new-energy sectors is particularly eye-catching.

As the main force in promoting China's green and low-carbon development, the companies in photovoltaic field of the flourishing new energy industry have become the best performers in earnings thanks to the explosive growth of downstream customers.

So far, seven photovoltaic companies on the sci-tech innovation board have disclosed third-quarter reports or performance forecasts, with an average net profit of 2.241 billion yuan, a significant increase of 128.35 percent year-on-year.

"The earning results on the micro level could reflect that China's economic growth is gaining more momentum in the post-COVID period, compared with the first half of the year," Cong Yi, an economics professor at the Tianjin University of Finance and Economics, told the Global Times on Monday.

"We could also notice the structural improvement in China's economy from the listed firms' latest financial figures," said Cong. 

As the country is pushing forward with the historic transition to becoming an innovation-driven economy, tech innovations and emerging industries have been on a fast growth track, which is expected to enhance the foundation of the country's manufacturing sector. 

Green transformation 

China's green technology revolution has led to a wave of green transformation, marked by the rapidly rising export of Chinese new-energy vehicles (NEVs).

Data from China Association of Automobile Manufacturers showed that China exported a total of 534,000 units of NEVs in the first six months this year, a jump of 160 percent.

"Looking at the development trend, we believe that the listed companies will continue to improve their profitability in the remainder of the year thanks to the steady recovery of domestic market demand and the government's macro policy support," Zhou Maohua, an economist at Everbright Bank, told the Global Times on Monday, adding that new energy and NEVs are expected to maintain the fast growth rate.

The picture painted by listed firms' financial reports is in line with official data, which showed that Chinese economy is well on a sustained recovery track, Zhou noted.

China's GDP grew by 5.2 percent in the first nine months of the year to 91.3 trillion yuan, data from the National Bureau of Statistics showed. In the third quarter alone, the economy expanded 4.9 percent year-on-year, which far outpaced economists' average forecast of 4.4 percent growth.

The fourth-quarter rate is widely estimated to reach at least 5 percent, considering the lower comparison base of 2.9 percent in the same quarter last year. Combining such estimates, economists and investment banks have raised their estimates for China's GDP growth this year to at least 5.2 percent.

Market stabilizing

China's economic fundamentals are solid, which will support continuous improvement of the listed firms and driving the stock market to reach a higher level, industry observers said.

Observers contend that the country's "A-share market has strong base support including mass expectations for a significant rally," Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co, told the Global Times on Monday.

Bolstered by a number of stimulus measures, China's stock market ended higher on Friday after the benchmark Shanghai Composite Index dipped below 3,000, a major psychological level. On Monday, the stock market maintained upward trend, with the index ending up 0.12 percent from Friday.

"State capital taking the lead in purchasing equities" regardless of short-term losses are considered as a sentiment booster, Yang said.

Central Huijin Investment Ltd, an arm of China Investment Corp, the nation's sovereign wealth fund, increased its holdings of Chinese equities last week, the second time in half a month.

As a sign of a possible bottoming-out in A-shares, some foreign investment funds begin to buy Chinese assets. UBS Group, Barclays and other foreign institutions have frequently appeared on the list of the top 10 holders of newly established and listed exchange-traded funds (ETFs).

And, a mix of tailored stimulus measures could be announced by the government to further boost market confidence. The possibility of further cut on reserve requirement ratio (RRR) and the interest rate could not be ruled out in the fourth quarter, industry observers said, citing the demand for adding liquidity and reducing financial costs in the real economy.

"It is expected that in 2024, the A-share market may enter into a bull market," Yang said.