A-share firms' overall profits flat-lining

The overall financial performances of companies listed on the A-share market reached the lowest level last year since 2008, as net profits flat-lined compared to 2011.

According to 2012 annual statistics on the A-share market produced by Wind Information Co Ltd, a leading financial information services provider, total revenue of the 2,469 listed companies in the market topped 24 trillion yuan ($3.9 trillion), a growth of 8 percent, while net profits were unchanged at 1.95 trillion yuan, the worst performance since 2008.

The statistics showed 2,172 listed enterprises increased profits in 2012, 46 fewer than the previous year, while the number of companies suffering losses increased from 147 in 2011 to 193 in 2012.

Only 557 companies saw net profits grow more than 30 percent, against 756 companies in 2011.

The Wind figures showed services, and food and beverage were the top two well-performed sectors.

Market commentators said confidence levels were rising, despite the difficult 2012, led by a strong financial services sector.

"The market is already at a historic low and is bouncing back slowly," said Zhang Qi, an analyst at Haitong Securities Co Ltd in Shanghai.

Oliver Chiu, head of research and investment advisory in the wealth management unit of Citibank (China), added: "The A-share market is in the process of correcting, which makes it a good time to buy."

The overall economy recovers in the first quarter, Chiu said.

He also said daily consumption-related industries such as drinks, automobiles and household electric appliances will maintain growth.

He predicted that overall annual growth in the A-share market is expected to be better this year than last, as confidence has risen among the majority of enterprises, after increased profits in January and February.

"The Shanghai Composite Index probably will climb to 2,500 and even 2,700 before the end of fourth quarter if the market stays stable," Chiu said.

Wind's figures showed the financial sector still plays a major role in the A-share market, with large contributions coming from banks, insurance companies and brokers.

The total amount of net profit from 52 listed companies in the sector was 1.09 trillion yuan, 56.77 percent of the total profits.

The net profit of 16 listed banks was 1.03 trillion yuan.

"The banking sector maintains its strong advantage in the market after its high returns of the past decade, and that's expected to continue," added Jing Ulrich, chairman of Global Markets of JPMorgan Securities (Asia Pacific) Ltd.

The property sector also enjoyed solid growth, with rises of over 24 percent in business revenue and nearly 15 percent in net profits in 2012.

"The property sector is expected to recover in the next two years as the worst period for the industry has passed — but it won't rebound under the continuous restrictions from the central government," said Li Shaoming, an analyst from China Investment Securities.

However, industries such as steel, nonferrous metals, construction and commercial trading, which increased more than 20 percent in 2011, failed to maintain that rapid growth in 2012.

The steel sector, in particular, experienced the sharpest drop, with a 144 percent slump in fortunes to a total loss of more than 6.5 billion yuan.

"The severe losses in the steel, shipbuilding and nonferrous metal sectors will affect the overall performance of the market," said Ulrich.

She added that if the economy continued growing steadily this year, it was still possible to see a rebound in the market by the end of year, but it definitely wouldn't happen in the first two quarters.