About 67% of the 599 Chinese mainland-listed companies that have released first-half estimates expect improved earnings, including 172 companies that estimated a surge of more than 100% in net profits. Another 76 said first-half net profits had risen 50% to 100%. Companies that said their earnings had probably doubled mainly fell into the categories of chemicals, mechanical equipment and electronics. In-vitro diagnostic instrument maker Beijing Hotgen Biotech has topped the earnings rankings thus far. Its filing with the Shanghai Stock Exchange disclosed that its first-half net profits skyrocketed by as much as 81,808% to reach CNY1.6 billion. Chipmakers, mostly traded on the STAR Market in Shanghai and the ChiNext board in Shenzhen, also reported profit increases. Shares of Shenzhen Sunmoon Microelectronics surged another 20% on July 1 after hitting the 20% daily limit the previous day. The integrated circuit design and packaging test company estimated that its first-half net profit soared 936% year-on-year.
In the first half, the tech-heavy ChiNext index recorded a 17.22% rally, rendering it the best-performing A-share index and the fourth best-performing globally. Companies engaged in bulk commodity and basic raw materials may surge in the second half because the economy will likely fully recover, and those that just begin to recover will continue to drive China's exports, Cao Heping, Professor of Economics at Peking University in Beijing, told the Global Times, noting that the consumption sector will continue to fire up GDP. “The sound performance of these sectors reflects an efficient and stable economic recovery in the first half, with the two-year average almost back at the pre-Covid-19 level,” Dong Dengxin, Director of the Finance and Securities Institute of Wuhan University, said. With the new delisting rules which took effect on July 1, A-share companies with a market capitalization lower than CNY300 million for 20 consecutive trading days will be forced out of the market.
In all, 248 companies listed in the A-share market in the first six months, up 110% year-on-year, raising CNY 212.7 billion, up 53% year-on-year, according to KPMG. The IPO surge confirmed the importance of the Nasdaq-like STAR Market of the Shanghai bourse and the ChiNext of the Shenzhen Stock Exchange. Around 175 companies went public on the two technology-heavy boards over the past six months, raising CNY125.3 billion. Of the 10 largest IPOs in the first half, six were on the STAR Market or the ChiNext. Industrial-scale manufacturers, technology, media and telecom (TMT) companies, and consumption firms were among those that raised the biggest amounts from their IPOs. KPMG analysts said the advance of the digital economy and high-end manufacturing will encourage more TMT and industrial firms to consider listing in China.
The American depository receipts (ADRs) of ride hailing firm Didi Global ended their first trading day on the New York Stock Exchange 1% higher at USD14.14, giving the company a market value of about USD68 billion. The Beijing-based company raised USD4.4 billion from its IPO of about 317 million ADRs, or about 10% more than originally planned, making it the second-largest U.S. listing by a Chinese company on record, after Alibaba Group Holding. But experts said the listing size is lower than what some people had expected, suggesting the company may have faced some challenges. Didi has a dominant presence in China’s ride-hailing market, but it faces risks such as stricter regulations and intensifying competition. Didi is now under review by the Cybersecurity Administration of China (CAC) and its app has been temporarily removed from app stores (see story below).
Didi’s revenue more than doubled to CNY42.2 billion in the first three months of this year, up from CNY20.5 billion a year earlier. It also reported a profit of USD95 million in the period. Didi, which was founded in 2012, said in its IPO prospectus that it has 493 million annual active customers, and 41 million average daily transactions. It began expanding internationally in 2018, and the company now operates in 14 countries outside of China, including Brazil and Mexico. Didi said it will invest approximately 30% of the proceeds raised from the IPO to boost its technological capabilities, including shared mobility, electric vehicles and autonomous driving technologies. Another 30% will be used to raise its presence in international markets, and 20% in introducing new products and expanding existing offerings for consumers. This year, like Didi, 28 other Chinese firms launched U.S. IPOs, raising USD7.6 billion in the first six months, according to Refinitiv.
The World Bank projected in its latest report that China's GDP growth will reach 8.5% this year before slowing to 5.4% in 2022, as low base effects dissipate. “Improved consumer and business confidence and better labor market conditions will support a shift toward private domestic demand from public investment and exports. On the supply side, the drivers of economic growth are expected to gradually transition from industrial production toward services,” according to the World Bank report.
Foreign Ministry Spokesperson Wang Wenbin added that in the first five months of the year, China's GDP posted a steady expansion while the country's actual use of foreign investment hit CNY481 billion, an increase of 35.4% year-on-year. Meanwhile, the country's non-financial outbound direct investment (ODI) grew 2.6% to USD43.29 billion while its total trade reached an all-time high of CNY14.76 trillion. China will unswervingly expand its comprehensive opening-up and make the Chinese market a globalized one for everyone to share, Wang said, as reported by the Global Times.
