Deteriorating corporate earnings prospects are casting a shadow over the outlook for China’s stock market. Investors are also worried that the boost from holiday consumption during the Spring Festival may not be enough to rekindle the current rally.
According to Bloomberg, Morgan Stanley’s analysis shows a “significant deterioration” in profit forecasts for the fourth quarter of 2025. Nomura Holdings meanwhile points out that as some government stimulus programs cool down, the latest economic indicators highlight weak consumer demand.
These factors have exacerbated market concerns that, with ongoing economic uncertainty eroding consumer spending, the nine-day Spring Festival holiday may not provide as much of a boost to corporate earnings as in previous years. China began its longest-ever nine-day holiday on Sunday (February 15).
Bloomberg quoted Vey-Sern Ling, Managing Director at Union Bancaire Privée (UBP) Singapore, as saying market sentiment for Chinese equities is currently subdued. He said: “On the one hand, investors are unwilling to take risks before the long holiday; on the other, there is a lack of new catalysts, recent regulatory scrutiny appears to be tightening, and competition remains fierce.”
Bloomberg quoted Vey-Sern Ling, Managing Director at Union Bancaire Privée (UBP) Singapore, as saying market sentiment for Chinese equities is currently subdued. He said: “On the one hand, investors are unwilling to take risks before the long holiday; on the other, there is a lack of new catalysts, recent regulatory scrutiny appears to be tightening, and competition remains fierce.”
So far this year, the MSCI China Index has risen only 0.8%, trailing the MSCI World Index’s 2.8% gain. The contrast is starker within Asia: South Korea’s main stock index has surged 31%, and Taiwan’s equity market is up 16%.
Meanwhile, China’s earnings season has already shown signs of weakness. Morgan Stanley’s statistics show that among the more than 2,000 A-share listed companies issuing fourth-quarter 2025 earnings forecasts, negative guidance exceeded positive by 14.8%; this net negative was only 4.8% in the second quarter of 2024. Small and medium-sized enterprises fared worst, especially those in real estate and consumer-related industries.
Slower economic growth is a key factor weighing on corporate profits. China’s economy grew by 4.5% year-on-year in the fourth quarter last year, the lowest level since the lifting of COVID controls at the end of 2022. In January, the Producer Price Index (PPI) fell by 1.4% year-on-year, extending a deflationary trend seen since the end of 2022; the Purchasing Managers’ Index (PMI) also showed an unexpected economic slowdown.
Meanwhile, China’s earnings season has already shown signs of weakness. Morgan Stanley’s statistics show that among the more than 2,000 A-share listed companies issuing fourth-quarter 2025 earnings forecasts, negative guidance exceeded positive by 14.8%; this net negative was only 4.8% in the second quarter of 2024. Small and medium-sized enterprises fared worst, especially those in real estate and consumer-related industries.
Slower economic growth is a key factor weighing on corporate profits. China’s economy grew by 4.5% year-on-year in the fourth quarter last year, the lowest level since the lifting of COVID controls at the end of 2022. In January, the Producer Price Index (PPI) fell by 1.4% year-on-year, extending a deflationary trend seen since the end of 2022; the Purchasing Managers’ Index (PMI) also showed an unexpected economic slowdown.
Nomura’s Chief China Economist, Ting Lu, pointed out that both manufacturing and non-manufacturing PMIs came in well below expectations, reflecting insufficient intrinsic demand; this year, the weaker push from ‘trade-in’ stimulus policies has also created stiff headwinds for consumption.
In the weeks ahead, the importance of economic data may diminish. Statistics authorities often release combined January and February data to smooth out the distortions caused by irregular Spring Festival timing; and before the National People’s Congress in March, the likelihood of major new policy announcements is low.
Meanwhile, tightening regulation has also made the market more cautious. Last month, regulators tightened margin financing rules in a bid to curb speculative trading and reduce the risk of sharp market swings in the future.