Rewritten and expanded article:
The latest earnings reports from Chinese companies reveal a skewed economic recovery following the lifting of pandemic restrictions. While people in China have shown a willingness to spend on dining, travel, and luxury goods, they remain cautious about spending on routine consumer items. The first quarter corporate results indicate that consumer confidence and overall demand have been affected by concerns over global growth and job prospects.
According to estimates from BofA Securities, China A-shares experienced a 3.2% growth in earnings in the first three months of 2023 compared to the previous year, bouncing back from a 5.7% drop in the fourth quarter of 2022.
However, it’s important to note that the benefits of this economic recovery have not been evenly distributed among companies. Data from China International Capital Corp (CICC) shows that while restaurants and tourism businesses have recovered well, with earnings in the travel-related consumer services sector surging 155%, the earnings of home furnishings and apparel firms declined by 9%.
The sub-sector results further highlight the divergence in consumer behavior. Major jewelry brands like Lao Feng Xiang and Chow Tai Seng experienced double-digit growth in earnings, while leading cosmetics firm Bloomage Biotechnology saw a 17% decline in its net profit due to lukewarm online sales.
Consumer confidence is expected to gradually restore over time, with people starting to spend more as they become more comfortable throughout the year. Analysts predict that the first quarter will be the low point for 2023 and expect full-year earnings to reach double digits.
Despite a slight retreat in April, the benchmark Shanghai Composite has risen by 8% so far in 2023. The materials sector performed poorly, with earnings in steel and building materials tumbling by more than 60%. Real estate, healthcare, and apparel were notable underperformers, while financials, consumer services, and utilities outperformed with positive growth.
Analysts believe that earnings have hit a low point and are expected to improve in the coming quarters. The April Politburo meeting hinted at forceful fiscal and monetary measures to support the economic recovery.
However, the uneven consumption patterns seem to have continued into the second quarter. Data from the Labor Day holiday in May showed that while households were willing to dine out and take short domestic trips, they were still reluctant to spend on discretionary goods and products.
In conclusion, although China has seen a bounce in earnings following the lifting of pandemic restrictions, the recovery has been imbalanced. Consumer caution, concerns about global growth, and job prospects have impacted overall demand and confidence. While some sectors and companies have experienced strong growth, others have seen declines. Analysts remain hopeful that as consumer confidence gradually improves, spending will increase throughout the year.
Some useful links related to the article:
1. China Shares Extend Slide as Wary Investors Face Analyst Warnings
2. China firms brace for high base effects, mixed economic optimism
