Analysts: Reform spurs better interim results
By Fei Ya (China Daily)
Updated: 2006-09-05 09:22
China's ongoing securities reform spurred better performances by domestic
listed companies and sound interim results are expected to further lift investor
confidence in the A-share market, analysts said.
The securities reform of
the capital market was launched in May 2005 and required listed companies to
gradually convert original non-tradable State-owned shares to tradable ones,
pushing many companies to restructure.
By the end of August, 1,388
domestic listed companies of the total 1,392 had released interim reports, more
than forecast by most investors.
Those 1,388 companies reported a
combined 127.8 billion yuan (US$15.98 billion) in net profit for the first half
of the year, up 7.54 per cent year-on-year.
The combined revenue of those
companies hit 2.4 trillion yuan (US$300 billion), an increase of 18.37 per cent
compared to the same period of 2005, according to Shanghai-based Wind
Statistics.
Business in the life insurance, industrials, toll roads and
aluminium sectors saw an upward swing, while property and casualty insurance and
coal players reported major earnings disappointments.
Analysts pointed
out that the successful securities reform is now starting to take effect to
enhance companies' performance and corporate governance.
"The asset
quality and profit-making ability of those companies who finished the securities
reform have seen an obvious increase," said Zhou Feng, an analyst with
Shanghai-based Shenyin Wanguo Securities.
By August, 1,144 listed
companies, 90 per cent of the overall domestic listed firms, had finished or
begun their securities reforms.
Meanwhile Chinese companies' profits have
been rising at a steady pace this year, contributing to the sound interim
results of most listed companies.
A recent report by JP Morgan shows that
the aggregate profits of the country's major industrial enterprises rose 28.6
per cent during the first seven months of 2006 compared to the same period last
year, including a 34.3-per-cent growth in July alone. It predicted a stabilizing
corporate profit trend in the following months.
Chinese equities
maintained their current trading level during the August earnings season on the
back of strong interim results.
"We believe the A-share rally in the
first half year of 2006 was just the beginning of a multi-year re-rating of
China's A-share market, powered by five forces: successful non-tradable share
reform, enhanced corporate governance, a diversified investor base, higher
quality upcoming IPOs, and healthy earnings-per-share growth," the report
said.
Anticipation of further tightening measures on the fast-growing
economy, especially in the property market, and a slew of new IPOs are expected
to have a negative impact on the A-shares market.
But analysts believe it
will rebound in the fourth season.
Wei Daoke, another analyst with
Shenyin Wanguo Securities, said the third-quarter would be the weakest period,
but that there would be investment opportunities in the second half of the
year.
(For more biz stories, please visit Industry Updates)
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