Profit margins in big Chinese companies recorded sharp growth, halting the slow movement they have been facing since October last year, as production continued to remain high.
Industrial profits rose from 3.1% in March to about 21.9% in April, the figure for January and February was a combined 16.1%. According to the Chinese Bureau of Statistics, industrial profits totalled about 576.03 billion yuan which approximates to about 90.1 billion dollars.
The reason for this growth according to the bureau was attributed to increase output, improved profit margins recorded in the auto, steal and chemical industries, and the recovering factory inflation.
The supply reform policies being carried out by the industrial companies in china, is helping to cut production costs and in turn increasing profits. This has led to a 15% rise in profits from 12 months ago. This is reflected in the figures released by the bureau.
The Equity Market in China is poised for an unlikely but timely win
China’s local stock looks set to record gains that outperforms stocks listed in foreign markets. This is happening for just the third time in 2 years.
Although, the profit margin is relatively slim, it is still being considered as a win for mainland shares and it augurs well for their entrance on the MSCI Inc.’s worldwide standards during the week. Examples of stocks that recorded marginal profits this week include, the Shanghai Composite Index which recorded a 1.9% rise this month bringing an end to a three month decline. The MSCI China Index also recorded a 1.6% rise as well.
The local Chinese stocks have in the past three years struggled to recover from the stock exchange bubble that hit the equity market which is worth about $7.6 trillion in 2015. With foreign investments coming into the market albeit at a slow pace, the bounce experienced is significant considering other upcoming markets worldwide are trading off.
To confirm that the profits witnessed is just for a short period of time, last week, what seemed like an aggressive start for onshore gauge fizzled out by Wednesday, which led to its first loss in five weeks. This just goes to show the vulnerability of the shares to any change in the global market as well as any major change to policies can have a huge effect on huge market sectors like oil.
Beginning in June, MSCI will introduce over 200 locally listed companies like the brokerage Guosen Securities Co., distiller Kweichow Moutai Co., in its standard equity gauge. While the premium on the shares will be relatively small when compared to the size of the market at the start, the index provider indicated last week that the rise would happen a lot quicker than anticipated.
As soon as the concerns on trade die down, the gap between the Chinese Capital markets and the rest of the world would gradually reduce as the Chinese capital market begins to open up.
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