The overall market in the third quarter has shown signs of recovery, boosting the confidence of investors in October. [China Daily]
Nearly half of the 790 listed companies that have released forecasts on their third quarter performance showed positive results, raising expectations for a recovery of the equity markets in both Shanghai and Shenzhen.
According to the securities consultancy Wind Info, 386 companies are expecting a black balance sheet.
Real estate, automobile, electronic appliances and other consumer-related companies all realized a better performance in the third quarter than expected, said Li Xianming, strategic analyst with Ping An Securities.
Shenzhen Properties & Resources Development (Group) Ltd (SPRD) was the first company to issue its Q3 report Sunday evening, and its soaring revenue raised the market expectation on following reports.
SPRD, a Shenzhen-listed property management company, reported that its net profit in the third quarter soared 658 percent compared with the same period last year. It made a net profit of 53.98 million yuan ($7.91 million) from July to September. Its earnings per share registered 0.0996 yuan during the same period.
Guo Feng, an analyst with Northeast Securities, said the high quarterly profit of SPRD was just one case but it marked a strong comeback in the realty sector.
"Supported by resilient cash flow and rigid demand in the market, the average profit increase in the housing sector will reach 20 percent," Guo said.
Kunming Pharmaceutical Corp said it made a net profit of 20.94 million yuan between July and September, up 404 percent in comparison with 2008.
Luzhou Laojiao Liquor reported a net profit of 403.5 million yuan yesterday, up 17.5 percent over 2008 in the third quarter. Its net profit in the first nine months totaled 1.255 billion yuan, jumping 15.7 percent.
In October, a spate of non-tradable shares will be released from the lock-up period and enter the secondary market, which will impact on the already bearish-look market. Judging from reports from the above-mentioned companies, investors still have enough confidence to stay in stocks.
Worries about the expiry of the non-tradable shares' lock-up period have not lessened. Statistics from Wind Info earlier showed that a total of 313.057 billion shares will become tradable in October, taking up 45.44 percent of the year's quota.
But analysts said there was no need to exaggerate the negativity of the new shares because most of them are held in State-owned corporations.
"It's a cry-wolf situation. The market won't take much pressure from the expiry of locked-up shares, because most of the shares are held by State-owned companies, and they will hold them to take control of the company and reap long-term returns," said Li. "In other words, you won't see a torrential influx of shares into the secondary market," he added.
Gong Fangxiong, JP Morgan chief economist and head of China Research, held the same view. "The non-tradable shares won't generate a substantial impact on the market, and its influence depends on how the market regards it," he said.
"For instance, in a bearish market, it can be viewed as a leading factor in downward market, while in a bullish market, its impact cannot be ignored. In addition, there is ban-lifting on non-tradable shares every month, so don't panic," he added.
According to Li, the market prepared months ahead for the large chunk of newly tradable shares, and currently, the Q3 reports draw more market attention.
Li said the overall market in the third quarter has shown signs of recovery, boosting the confidence of investors in October.
"Currently, we have seen the market showing optimism, coming from the positive macro economy indices and the performance of listed companies," Li said.
Guo from Northeast Securities, said he expected the overall performance of listed companies to be better off in the second half. "On average, all the listed companies have a 50-percent increase in revenue from the first quarter. Steel, electronics, and non-ferrous metals will have substantial growth in their second half," he said.
A total of 34 companies were due to unveil their third quarter reports between October 12 and 19, and from October 20, the two bourses will have nearly 1,600 listed companies' third quarter performance reports within 12 days, according to the regulations of China Securities Regulatory Commission (CSRC).
All the companies that are listed in Shanghai and Shenzhen should publish their third quarter reports before the end of October, said the CSRC.