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January 10, 2018

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Corporate profits seen to rise slowly

CHINA’S corporate profits are expected to grow more slowly this year compared to last year, with the country’s gross domestic product likely to slow as well, according to UBS.

A-share companies are forecast to see a 7.6 percent growth in earnings in 2018, a sharp drop from the 20 percent surge in the first three quarters in 2017, mainly due to the influence of a GDP slowdown, UBS’ latest research showed. Meanwhile, the authorities are set to intensify financial supervision this year as they implement stricter regulations and risk control.

China’s GDP growth may slow to 6.4 percent, down 0.4 percentage points from last year, according to UBS.

“We expect economic growth to extend this year, but at a lower pace, mostly as the government is trying to take the steam out of the real estate market,” said Gao Ting, chief strategy analyst of UBS Securities China.

Investments in real estate are seen to drop to 3-5 percent this year from 7-9 percent in 2017, according to UBS. Also, investments in infrastructure are set to slow slightly, while the consumer market is slated to stay robust with the Consumer Price Index seen to rise to 2.5 percent from 1.6 percent.

The target point of the A-share index is 4,450 points this year, while the earnings per share of MSCI China may rise 12 percent, slower by 4 percentage points than in 2017, according to UBS.


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