SHANGHAI: Listed companies are likely to see their profits squeezed further in the second half of the year due to possibly rising commodity prices and a lukewarm stock market, according to a report.
“Higher investment returns and increasing fiscal subsidies have helped listed companies to slow a decline in profits in the first half of the year, but it’s not sustainable,” the Institute of Finance and Banking of the Chinese Academy of Social Sciences said in a report.
“It’s unlikely for companies to reverse a downward trend in revenue amid an economic downturn, while an expected uptick in commodity prices in the second half may increase their operating costs and a cooling stock market will cut their investment returns,” the report added.
In the first six months of the year, listed companies reported a total gross profit of 684.4 billion yuan (US$107.5 billion), down 2.9 percent year on year. Profits from their core business, meanwhile, decreased 10.9 percent to 531.8 billion yuan as revenue shrank while management fees and tax payment rose.
A robust stock market in the first half of the year helped to narrow the decline as profits from investment surged 35 percent year on year to 131.9 billion yuan.
The analysis was based on first-half financial figures of 2,400 non-financial companies listed on the Shanghai and Shenzhen stock exchanges before 2010.
The report showed that main board-listed companies, mainly large-sized entities in traditional sectors, posted a 6.6 percent year-on-year decline in first-half revenue.
Meanwhile the revenue of small and medium enterprises rose 6.7 percent and companies on the startup board ChiNext saw a 24.4 percent increase, according to the report.
