CHINA’S 1,200 listed firms face a rocky ride for the rest of this year as grinding competition would force more into the red while a government crackdown kicks chronically poor performers off the exchanges, analysts said. One in every seven listed companies reported a loss for the first half of this year and an unprecedented four companies said they faced a delisting, part of a fierce regulatory campaign to clean up the murky and poor quality stock markets. Despite China’s economic growth officially estimated at 7.8 percent in the first half of the year, companies blamed intense competition, overcrowded markets and the country’s recent entry to the World Trade Organization for their poor showings. Earnings dropped an average 19.7 percent year on year to 0.0822 yuan per share, and 170 companies out of 1,204 reported a loss, official State newspapers reported. One in eight posted a loss at the end of last year. But it was not all doom and gloom for corporate China. A few sectors like banks and mobile phone makers turned in upbeat performances, and a handful of firms like Shanghai Petrochemical outshone their peers despite a tough environment. “Earnings were all over the place and it’s difficult to generalise,” said Norman Ho of fund manager, Value Partners, which has US$420 million directed at Greater China. “We are quite optimistic on basic commodities like oil and they may enjoy price inflation in the slow overall economy.” Four companies — Xiamen Ocean Shipping, trade firm Fujian Jiuzhou, tractor maker Anshan No. 1 Construction Machinery and construction material producer Shantou Hongye — expect to be delisted after three and a half years of losses. That would bring the number of listed companies axed in China to an unprecedented seven this year, compared with only three last year when China first reformed its securities regulations to allow its pilot delisting. Analysts said they expected intense competition to push more creaky State companies into the red in the second half, the situation exacerbated by more foreign rivalry following China’s WTO entry last December. Overcrowded industries ranging from appliances to airlines to petrochemicals are already suffering from brutal price wars. Airline profits were hit by unauthorized discounts given on domestic flight tickets and analysts said the rest of the year would be volatile for domestic carriers which have few hedging tools for currency and oil price fluctuations. Carmakers logged strong profits for the first half as price cuts attracted buyers, but they were expected to show weaker margins and sales volumes in the second half as bargain lovers hold back in hope prices will fall further. Analysts say the reason, again, is competition. Although more Chinese can afford to buy cars, the government is allowing more global giants onto its turf under WTO promises. “Competition is only increasing,” said fund manager Ho. “TV companies have already been competing for ten years so they’re used to it. But cars are still in a relatively protected environment.” One bright spot is, surprisingly, the listed banks. Smaller and burdened with fewer bad loans than the country’s unlisted big four State banking giants, these better-managed lenders plugged directly into robust economic growth and posted strong first-half earnings from a growing customer base. As the global economy remains fragile, analysts say the smart money is on Chinese companies not as dependent on exports. That way, a sharper or quicker than expected global economic recovery would be the icing on the cake. “Generally our view is that the oil producers, airlines and transport sectors are looking quite good,” said Stewart Aldcroft, managing director of Investec Asset Management Asia. “We’re pretty positive on China at the moment.” Some appliance makers like Shenzhen Konka and Sichuan Changhong managed to get back into profit in the first half by turning to the more lucrative mobile phone business. “Investors should focus on companies exposed to the domestic market,” said Peter So, head of China strategy at ING Barings in Hong Kong. “Retail sales in China are very strong.” (SD-Agencies)