11:34 PM
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Investors in China’s main financial district are talking about the following before the start of trade today:
Earnings season is winding down this week. A number of grim profit reports and worries about the outlook for economic and profit growth in the second half are competing with optimism about share buybacks among state-owned companies. Shares in Baoshan Iron, one of the world’s largest steelmakers, soared by 10% yesterday after the company said it would spend up to 5 billion yuan to purchase its shares.
Yet it’s the earning reports from what has been one of the world’s best-performing economies that stand out, especially given the country’s current economic policy drift. Flag carrier Air China said yesterday first-half profit plunged 74% amid rising costs and slower international business. Its shares lost nearly 6% in the U.S. overnight. China Life, the country’s biggest insurer, said yesterday its first-half profit declined 26% from a year earlier (though its shares rose afterward).
Earnings at real estate companies being affected by government controls on the property industry have also been predictably bad; additional worries are building that the government will adopt new tax policies that will further hurt the industry. Evergrande Real Estate, whose chairman Hui Ka Yan ranked No. 6 on the Forbes China Rich List last year with wealth of $6 billion, reported yesterday that net profit fell 2% in the first half; its shares are down by a fifth in the past year.
The auto industry, another key sector, has also been turning in results that have been mixed at best. Hong Kong-listed shares in SUV maker Great Wall rose by 3% yesterday after it said last Friday first-half profit rose 30%. (See related story here.) Yet big state-controlled Guangzhou Auto, a partner of Honda and Tokyo, said yesterday said net profit fell by 15% in the first half amid tepid industry growth. Zhongsheng Auto, a distributor of Mercedes-Benz, Audis and other makes, said yesterday a company controlled by billionaire chairman Huang Yi bought back shares for the third time in a week after it reported a 27% in its net profits during the first half of the year. (See related story here.) Rival distributor Pangda, whose shares trade in Shanghai, may face selling pressure today it posted a 48% fall in first-half profit today and on reports that it altered customer contracts.
Because China’s economy is so vast, growth can come in unexpected places. Yesterday, shares in Kangmei Pharmaceutical, one of the country’s largest producers of traditional Chinese medicine, gained 1% after it said first-half profit soared by 62%. (See related story here.) The company is led by Ma Xingtian, who with his family ranked No. 854 on the 2012 Forbes Billionaires List with wealth of $1.5 billion.
Retailers, though under pressure from slowing economic growth in China, are still a relatively bright spot. Shanghai Metersbonwe Fashion & Accessories, one of China’s largest home-grown apparel chains, said today net profit in the first six months of 2012 increased by 14.8% from a year earlier to 432 million yuan, or $67.5 milllion. (See related story here.) News from rival Zhejiang Semir Garment wasn’t so good: first half revenue fell 16% to 2.5 billion; net profit dropped 43% to 248.4 million yuan down on tough competition and slow demand, among other problems.
In news from the media industry, whose fortunes are also tied to the consumer and broader economy, Modern Media of China said yesterday it would hook up with licensing partner Bloomberg to offer Businessweek via mobile phone and tablet PC (see related story here). Its Hong Kong-traded shares are up 8% this year.
source: forbes.com
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