Chinese Listed Companies' Earnings Up 26%, Yet CSI 300 Down 9%
nashnova research
A-share net profit surged 25.7% year-on-year in Q2 — the fastest pace in nearly five years — yet the CSI 300 fell roughly 9% and the STAR 50 plunged about 29% over the same period, exposing deep market anxiety over AI sustainability and structural economic weakness.
Profits hit a five-year high — so why did stocks drop?
A-share listed companies posted 25.7% year-on-year net profit growth in Q2, the strongest in nearly half a decade. Yet the CSI 300 fell about 9% and the STAR 50 slumped roughly 29% over the same stretch.
This means → the market isn't buying it — earnings delivered, but prices are "selling the fact."
The STAR 50 had already rallied 76% in the quarter ending June; the CSI 300 gained 12% in the same window. From that high base, strong results became a trigger for profit-taking, not fresh upside.
Who is actually making money — and how narrow is it?
UBS data show ChiNext profits rose 42% year-on-year; the STAR board surged 370% — growth is overwhelmingly concentrated in AI-linked sectors.
The main board, which covers far broader industries, grew at a much lower rate. In plain terms = this is not a broad-based rally — AI alone is propping up the headline number.
Resources, financials, and pharma also improved: non-ferrous metals and coal rode commodity price gains; innovative drugs lifted healthcare; financials benefited from higher trading activity.
Even the top performers are falling — why?
CXMT — a memory-chip maker — beat analyst revenue expectations, yet its stock still swung. Hygon, Cambricon, and Eoptolink all reported strong results; their shares fell afterward.
Alibaba grew revenue but saw profits drop sharply, reflecting soaring AI project and computing-infrastructure costs. Tencent's AI spending more than doubled; its stock weakened in turn.
This means → investor fear over AI capex now outweighs enthusiasm for strategic ambition — the more aggressively a company spends, the more the market flinches.
Strong numbers no longer work for tech stocks. Investors worry about the long-term sustainability of earnings because the AI investment outlook is unclear, ROI is uncertain, and financing costs keep rising.
Vey-Sern Ling
Managing Director, Union Bancaire Privée
(凌威信)
How badly are consumption and property dragging?
Consumer-services demand is weak; agriculture, real estate, food & beverage, building materials, and autos all saw margins deteriorate.
Vanke's first-half losses widened. Kweichow Moutai's net profit slipped on softer demand. Muyuan Foodstuff swung into a loss.
In plain terms = AI is "sprinting," but the parts of the economy closest to ordinary consumers — spending, housing — are still bleeding. The recovery is deeply uneven.
Are FX losses and tax pressure quietly eating into profits?
CICC data show non-financial A-share companies booked foreign-exchange losses of RMB 107 billion (≈ US$16 billion) in H1, equal to 5.5% of net profit — a ten-year high.
Tax enforcement is tightening: Bloomberg counts at least 95 listed firms disclosing overdue taxes this year, already above the 66 in all of 2025 and on track for a record.
This means → even as headline profits rise, currency swings and tax costs are eroding what companies actually keep.
What comes next?
New listings are siphoning liquidity — YMTC and other tech IPO pipelines keep expanding, and investors chasing first-day pops are squeezing funds out of stocks that have already rallied.
Chanson & Co. director Shen Meng notes: a beat on existing-company earnings is now more likely to trigger profit-taking than to push valuations higher.
Still, forward earnings expectations for the CSI 300 and MSCI China remain near multi-year highs; further policy support from Beijing and a potential Xi–Trump summit could serve as fresh catalysts. This reflects the key question ahead: can the earnings recovery spread beyond AI and export manufacturing into broader industries — that is the test for whether stocks can close the gap with profits.
市场有风险，内容仅供研究参考，不构成投资建议。