CHINESE firms are on track for their strongest earnings expansion in seven years in 2024, LSEG estimates based on analysts’ expectations for government measures to prop consumer demand and the housing market showed.

An analysis of 1,721 Chinese companies with a market value of at least US$500 million shows their profits may rise 16% next year, the highest since 2017, when profits rose 20.9%.

They are expected to post a smaller growth of 14.5% in 2023, according to the data.

To combat a slump in the property sector, which accounts for about a quarter of China’s GDP, the government has stepped up spending, infrastructure investments by local governments and other housing programs.

“These measures could boost [earnings] growth and help asset prices recover in 2024,” said Liu Minyue, investment specialist for Asia and greater China equities at BNP Paribas Asset Management.

As per the forecasts, the consumer staples and software sectors may post earnings growth of 40% and 30%, respectively.

The consumer discretionary and industrial sectors are each expected to see roughly 20% growth, while the real estate sector may grow 18%. The energy and banking sectors are estimated to see the slowest growth of 4.3% and 8.2%, respectively.

John Lau, portfolio manager for Asia Pacific and emerging market equities at SEI, said it was encouraging to see recent initiatives for the real estate sector being more targeted than mere incremental funding support from banks as in the past.

Such stable or growth-centric government policies would also boost investor confidence in the e-commerce and consumer sectors, Lau added.

Some indicators have already started recovering, suggesting an economic rebound next year.

China’s third-quarter GDP beat expectations and imports are rising again, signalling robust domestic demand. Highway truck traffic, gasoline use and retail sales have also increased.

“Macro indicators are already flashing some encouraging signals that China’s targeted policy support this year may be starting to bear fruit,” said Alec Jin, investment director of Asian equities at Abrdn. (SD-Agencies)