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Wall Street Banks Cut China Corporate Profit Forecasts
Published on: 2022-04-28
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Some Wall Street banks are cutting profit estimates for Chinese companies citing impact from the recent Covidflareup and subsequent lockdowns.
 

UBS Global Wealth Management trimmed its earnings growth estimate to 11% from 13%, and expects downward revisions to continue in the second quarter, strategists including Eva Lee wrote in an April 22 note. They see earnings of Chinese firms stabilizing “around mid-year after more supportive policies are implemented.”
 

Morgan Stanley expects profit growth to reach 10% for MSCI China and 12% for the CSI 300 Index for 2022, which is 5 and 4 percentage points below consensus, respectively, according to an April 18th note. Goldman Sachs Group Inc. also expects earnings downgrades to come.
 

About a quarter of China’s more than 4,700 onshore-listed companies have published first-quarter results. Solar panel component maker Sungrow Power Supply Co. posted lower-than-expected earnings last week, triggering a 28% plunge in its shares over two days. Battery giant Contemporary Amperex Technology Co. delayed results, sparking a 9% decline in shares this week.
 

“First-quarter earning shocks may bring renewed pressure to the market,” Chen Guo, chief strategist at China Securities Co., wrote in a note this week. “We have cut our earnings forecasts for the second quarter” given the deteriorating economy, he added.
 

China’s Covid Zero policy has dealt a heavy blow to the economy, as stringent restrictions pressure supply chains and chill consumption. Brokerages including Morgan Stanley and Nomura Holdings Inc. have trimmed their economic growth forecasts. A weekslong lockdown that shut down much of Shanghai expanded to parts of Beijing this week, stoking fears of wider restrictions. The CSI 300 gauge plunged the most in more than two years on Monday and is set for the worst month since January 2016.

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