Chinese firms are poised for their most robust earnings expansion in seven years in 2024, fueled by government measures to bolster consumer demand and the ailing housing market.
Analysts’ projections indicate a 16% profit surge for Chinese firms next year, the highest since 2017 when profits soared by 20.9%.
This anticipated earnings growth is attributed to government initiatives to stimulate the property sector, which accounts for a significant portion of China’s GDP. Infrastructure investments by local governments and housing programs are expected to boost economic activity and corporate profits.
Analysts predict that the consumer staples and software sectors will lead the way in earnings growth, with 40% and 30% increases, respectively. The consumer discretionary and industrial sectors are also anticipated to witness substantial growth, around 20%, while the real estate sector is projected to expand by 18%. The energy and banking sectors are expected to see more modest growth of 4.3% and 8.2%, respectively.
The government’s targeted approach to supporting the real estate sector, as opposed to mere incremental funding measures, is encouraging investors. Stable or growth-centric government policies are likely to bolster investor confidence in the e-commerce and consumer sectors.
Increased national highway truck traffic, gasoline consumption, and retail sales further reinforce the optimistic outlook.
While the forecast is promising, analysts remain cautious about the potential for a repeat of 2023’s disappointing performance. The Shanghai Composite index is down about 2% this year, and foreign investors withdrew $21.2 billion from Chinese stocks through the Stock Connect program between April and October.