THE next few days are likely to be a tipping point for the world’s top performing stock market in China.

With some of the nation’s largest firms scheduled to report earnings, investors will be looking for evidence that an improving corporate sector will support valuations at a time when the government is paring back stimulus.

Doubt is creeping in — the Shanghai benchmark slumped 5.6 percent last week, its biggest weekly decline since Oct. 12, 2018. That’s reduced this year’s gain to 23 percent, still the most among major global gauges.

A stronger U.S. dollar is the latest headwind, while the memory of a flood of profit warnings in January may be spurring some profit taking before the earnings data.

“The days of valuation expansion on back of China’s strong economic stimulus are behind us now,” said Dai Ming, a Shanghai-based fund manager with Hengsheng Asset Management Co. “People will need to take a longer-term view and focus on earnings.”

Firms making up more than two-thirds of China’s US$7.5 trillion equity market are yet to release results before this season’s deadline Tuesday. The calculations include companies reporting for 2018 as well as for the first quarter.

Investors are looking for clues on growth from the biggest bellwethers among China’s 3,600-odd listed firms that are reporting this season. Industrial & Commercial Bank of China Ltd. — the country’s biggest company and the 13th most valuable stock in the world — is scheduled to report its first-quarter results today. An update from oil giant PetroChina Co. is also due today.

All signs suggest China’s nervy bull market is in need of a fresh catalyst. (SD-Agencies)