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Analysts raise their predictions for China’s earnings in 2023 because they think the country will be able to reopen its markets.

Analysts have raised their estimates for how much Chinese companies will make in 2023 because they think the country’s economy will get a boost from stimulus measures and the loosening of COVID-19 restrictions.

IBES estimates showed that in November, analysts raised the earnings of companies on the MSCI China index by 2% for the next 12 months. They had already cut the earnings for the next 12 months by 15% between January and October of this year because they were worried that growth would slow.

MSCI China’s forward earnings estimates for the next 12 months can be found at https://fingfx.thomsonreuters.com/gfx/mkt/akveqzrznvr/MSCI%20China.

Related: China will let some people with COVID stay at home in quarantine, – sources.

Refinitiv data also showed that the average earnings of Chinese large and mid-cap companies with a market capitalization of at least $1 billion are expected to rise 17.3% in 2023, which is the second-highest increase after India.

“We think that COVID-19 will loosen up a lot in the second quarter. We think that MSCI China’s earnings will grow by 15%–20%. This will be helped by lower commodity prices, faster economic growth, and fewer write-downs on assets. James Wong, a strategist at UBS, said this.

“This could boost the market’s total return to shareholders by 25% to 30% next year,” he said.

Earnings growth for Asian companies broken down by country

2023 https://fingfx.thomsonreuters.com/gfx/mkt/lbvggndnmvq/Breakdown% 20by% 20country% 20for% 20Asian%20companies’% 20earnings% 20growth% 20in% 202023.jpg

COVID is China 19 cases are still close to all-time highs. Still, there are signs of hope. In the past few days, major cities like Guangzhou have lifted their lockdowns, and Vice Premier Sun Chunlan said that the virus’s ability to spread disease was weakening.

IBES data shows that the consumer discretionary and consumer staples sectors are expected to make the most money next year, with net profit growth of about 35% each.

Profit growth for Chinese companies, broken down by industry

2023 https://fingfx.thomsonreuters.com/gfx/mkt/byvrljdjeve/Breakdown%20by%20sector% 20for%20Chinese%20companies’% 20earnings% 20growth%20in% 202023.jpg

Consumption will still be the most important opportunity for China stocks in 2023, according to UBS’s Wong. This is because consumers have been saving more because of the uncertain macroeconomic environment over the past few years.

Industrials and tech firms are also estimated to post growth of 30% and 23%, respectively, as the IBES data shows.

Analysts think that the tech sector’s earnings will go up with the return of online game licence approvals, the possible end of a dispute over U.S. authorities’ access to Chinese audits, and the end of cybersecurity investigations.

Shares of video game developers rallied this month after China’s regulator granted publishing licences to 70 online games, including titles belonging to major internet firms Tencent Holdings (OTC: TCEHY) Ltd. and NetEast Inc.

Related: According to the regulator, Tesla will recall 435,000 China-made Model 3 and Model Y vehicles.

In real estate, a recent slew of support measures, including loan repayment extensions, is expected to prop up the sector, which is estimated to post nearly 10% growth next year.

Regulators lifted a ban on equity refinancing for listed property firms this week.

The MSCI China index has fallen 29.3% this year, and its forward 12-month price-to-earnings ratio stood at 9.55, much lower than the 10-year average of 11.29.

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