Red ink alert: Hundreds of Chinese firms warn on profits

Shanghai (AFP) –


Hundreds of listed Chinese companies have slashed their forecasts for 2018 earnings this week in a sign that an economic slowdown and worries over US-China trade friction are beginning to bite.

Companies across a range of sectors from livestock producers to airlines to securities firms have submitted updated guidance to the country's two stock exchanges, warning that their balance sheets deteriorated due to a range of factors.

A Bloomberg News compilation found that around 440 companies had made such disclosures on Wednesday alone, a day ahead of a deadline to do so.

Concern over China's economic slowdown has increased in recent months, especially after data revealed earlier in January showed that GDP grew 6.6 percent in 2018, the slowest rate in 28 years.

Analysts say some sectors of the economy also are under either direct pressure from the China-US tariff war or putting off investment and expansion moves until the dust settles.

Companies lowering their outlooks have included telecommunications supplier ZTE, China Life Insurance, China Southern Airlines, and a slew of others.

"We're only just seeing the beginning of deterioration in corporate earnings as the economy slows further," Yu Dingheng, a fund manager at Shenzhen Flying Tiger Investment & Management told Bloomberg.

"Things will continue to go downhill for firms seeing business slowing and even as the macro-economy recovers, these individual firms will never be what they were."

E-commerce leader Alibaba appeared to offer a ray of hope with its announcement Wednesday of earnings for the October-December quarter, with profit up 37 percent.

But Alibaba, seen as a bellwether of overall consumer sentiment in China, also said revenue growth slowed to 41 percent in the period, the slowest increase in more than two years.

A number of global brands across several sectors also have recently warned they will take a hit from China's deceleration.

Apple stunned markets earlier this month when it said iPhone sales and overall revenues would be below most forecasts, citing economic weakness in China -- one of its biggest markets -- and the trade frictions.

Economists also say a year-long effort by China to rein in dangerously high levels of domestic credit had slowed economic momentum.

But research houses have noted bright spots in the economy such as e-commerce, and some predict that a resolution of the tariff war could lift a big weight off economic sentiment.

Full-year results for many Chinese companies are expected to be released beginning in March.