Global Markets
China's $3.5 trillion stock rout is becoming an earnings problem as profit forecasts keep falling
Analysts have cut 2026 profit estimates for MSCI China members by more than 4% since March, and third-quarter results are missing forecasts by an average of 9%, Bloomberg data show.
HedgeWeekly News Desk ·
Chinese equities have shed about $3.5 trillion in value since their May peak, according to Bloomberg data published on Sunday, and the slide is now being driven by weaker profits as well as weaker sentiment. The onshore CSI 300 closed at 4,036.30 on October 22, 20.2% below its June 22 closing high and inside bear-market territory.
Profit expectations have been falling for months. Consensus 2026 earnings estimates for companies in the MSCI China Index are down more than 4% since the end of March, and forecasts for Hang Seng Tech Index members have dropped by more than 13% over the same period. MSCI China companies that have already reported third-quarter numbers have missed analyst estimates by an average of 9%, which Bloomberg calculates is the second-largest quarterly shortfall in two years.
Several large names have disappointed. Battery maker CATL missed profit forecasts, Ganfeng Lithium fell short as lithium prices dropped, and China Mobile reported a 7.9% fall in net profit attributable to shareholders for the first nine months, to 106.2 billion yuan, on revenue down 1.8%. Trading activity has thinned too: onshore turnover is close to its lowest since July 2025 and outstanding margin debt has fallen to a one-year low.
Why it matters: allocators are split on whether this is a liquidity sell-off or a fundamental one. Bridgewater's China arm has turned cautiously optimistic and blames the third-quarter declines mainly on liquidity, while Berenberg's head of multi-asset strategy, Ulrich Urbahn, said it is too early to call a bottom, and Sumitomo Mitsui DS Asset Management's Stanley Tang favours Japanese, Korean and Taiwanese companies for their stronger earnings. With third-quarter GDP growth of 4.5% keeping Beijing inside its 4.5% to 5% target, the pressure for broad new stimulus is limited, so investors with China exposure will be watching the rest of the reporting season and whether state-backed funds step up their buying.