The other side of record profit warnings
6 August, 2012, 9:34. Posted by Zarathustra
Earlier we mentioned that Hong Kong-listed companies (many of which are Chinese companies) have issued profit warnings at a record pace. There is little doubt that many of these companies are facing an environment which, to them, is probably not much different from a hard landing.
Although we are not at all optimistic about China’s economy over the medium term (as well as corporate profit in general), a note from Credit Suisse suggests a contrarian interpretation of record profit warnings.
The chart below shows the updated counts of profit warnings for July and August (month to date). The count for July has no doubt broken any past records, pointing to difficult environment in which these companies are operating in. On top of that, we plot Hang Seng Index (HSI) along side. As Credit Suisse noted, the number of profit warnings peaked on March 2009, which happened to be the month when the index bottomed out.
Source: HKEX
Some food for thoughts for you.
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About Zarathustra
Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.