Chinese companies set for biggest earnings growth in 5 years in 2023-Refinitiv data

By Gaurav Dogra

(Reuters) - Chinese companies are expected to report their highest earnings growth in five years, Refinitiv data shows, as economic reopening after COVID lockdowns and accommodative monetary policy raise hopes for higher profits.

According to Refinitiv IBES data, China's large and mid-cap companies' profits are seen rising 16.2% in 2023, the fastest growth since 2017. The analysis is based on 1,164 companies with a market capitalisation of at least $1 billion. (Graphic: Net income growth for China based companies, https://fingfx.thomsonreuters.com/gfx/mkt/zjpqjeewrvx/Net%20income%20growth%20for%20China%20based%20companies.jpg)

Optimism has risen after China reopened following three years of maintaining a strict zero-COVID policy and Beijing pledged additional policy support to boost the ailing domestic economy.

Herald van der Linde, head of the equity strategy at HSBC, said the easing of COVID-19 restrictions and support from the property market would boost the outlook for consumer and travel-related sectors in mainland China.

The Reuters analysis showed utilities, consumer staples and consumer discretionary sectors are expected to lead growth with their estimated profit growth of 34.5%, 33.5% and 27.8%, respectively.

Meanwhile, the tech sector is expected to see earnings growth of 27% compared with 9.4% in 2022 while the property sector would witness 9.4% higher profits after a 4.9% drop last year.

(Graphic: Breakdown by sector for Chinese companies' net income growth, https://fingfx.thomsonreuters.com/gfx/mkt/xmpjkllrzvr/Breakdown%20by%20sector%20for%20Chinese%20companies%20net%20income%20growth.jpg)

E-commerce company JD.com and technologyinfrastructure and marketing platforms provider Alibaba Group are expected to report profit growth of 28.8% and 18.3%,respectively.

Profits of tech giant Tencent Holdings are expected to rise abbout 19% this year after a slump in 2022. China's video game regulator lifted many curbs for theindustry and granted multiple publishing licences to Tencent'sgames for domestic release last month.

"We expect China to outperform Asia ex-Japan due to its faster-than-anticipated reopening, continuing domestic policy support, and potential for stronger earnings growth," said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a note this month.

(Reporting by Gaurav Dogra in Bengaluru; additional reporting by Patturaja Murugaboopathy in Bengaluru; Editing by Vidya Ranganathan and Tomasz Janowski)