Hundreds of listed Chinese companies – from hog farmers can not buy pig feed, to glassware makers not able to collect receivables – flagged big losses for 2018, victim to the slowing economy and Beijing’s deleveraging.
Once-acquisitive companies, who paid top dollar for assets during the boom years, are increasingly being required to take heavy write-downs which are weighing on their own balance sheets already weakened using a bruising Sino-US trade war.
As of Wednesday, 129 companies estimated losses over 800 million yuan ($119.3 million) each for 2018, the Shanghai Securities News reported. Nearly 200 others flagged losses of over 100 million yuan each.
China’s economy grew at its slowest pace in nearly 3 decades recently, as ramped-up deleveraging efforts to curb shadow banking triggered a funding squeeze among smaller firms and choked the non-public sector.
Economic growth is anticipated to relieve further in 2010.
The benchmark Shanghai Composite index has fallen over a quarter up to now Yr.
“The economy is already cooling, and suddenly we’d the trade war, and that’s why we’re seeing countless earnings implosions,” said Yang Hongxun, an analyst with investment consultancy Shandong Shenguang.
“But it’s possible some publication rack using the bad year for any accounting big bath, so future results will be looking better.”
Robin Xing, Morgan Stanley’s chief China economist, said he was optimistic on Chinese stocks in 2019, betting that recent measures, including tax cuts, infrastructure investment and looser monetary conditions, can help stabilise growth.
Chinese organizations are rushing to publish profit warnings in front of a regulatory deadline by the end of January.
Chuying Agro-Pastoral Group Co, which breeds pigs and poultry, said late on Wednesday it will swing to a reduction in 2.9-3.3 billion yuan in 2018, in comparison with a return of 45 million yuan 2009.
The company said some pigs starved to death as they was without the cash to acquire take advantage of time. Asset and goodwill impairment write-downs also led to the loss, it said.
An estimated 1.45 trillion yuan ($216.17 billion) of goodwill impairment is located the books of listed Chinese companies, threatening to worsen troubles of a lot of firms already struggling to make margin calls.
Some firms, including gaming company Dalian Zeus Entertainment Co and Kaidi Ecological, forecast annual losses that exceed their market value.