A recent report from JPMorgan Chase suggests that current market expectations for Chinese corporate earnings growth in the fourth quarter of 2025 are too low, indicating significant potential for upward revision. The report notes that the earnings disclosure season is still in its early stages. As of February 10, only 3% of the market capitalization of the MSCI China Index and 10% of the market capitalization of the CSI 300 Index constituents had released their Q4 2025 results. Based on performance in the first three quarters, MSCI China EPS grew 8% year-on-year, implying a Q4 growth rate of -8%. The full-year market consensus expects growth of +2%, suggesting substantial room for positive surprises if actual Q4 results exceed this low baseline. For the CSI 300, Q3 EPS increased 11% year-on-year, driving cumulative growth for the first three quarters to 9%, laying a solid foundation for full-year performance.
Sector-wise, downward pressure on earnings expectations is highly concentrated in the financial sector. The MSCI China financial sector reported 39% year-on-year growth in Q3, while the market consensus for Q4 is only -18%, a sequential decline of 58 percentage points. The report views this implied assumption as potentially overly pessimistic, with actual financial sector performance likely to exceed current expectations. In contrast, the real estate, utilities, and healthcare sectors require the largest sequential growth improvements to meet full-year consensus targets, also indicating potential for positive earnings revisions. JPMorgan Chase states that as more companies report results, market consensus is expected to be revised upward.
Industry divergence is already apparent, with early-reporting companies showing structural strengths. By February 9, 3,059 A-share companies had issued their 2025 annual earnings previews. Approximately 36% were positive, including 625 companies forecasting growth, 96 forecasting slight growth/continued profit, and 375 forecasting a turnaround to profit. Positive previews are concentrated in sectors signaling recovering demand. The top five industries with the highest proportion of positive previews are: capital markets (84%), benefiting from rebounding profits in investment banking and proprietary trading; industrial conglomerates (71%), driven by rising commodity prices, cost optimization, and narrowing impairment losses; power utilities (67%), boosted by lower coal prices and expanding renewable energy capacity improving margins; airlines (60%), supported by recovering travel demand; and auto parts (57%), where new energy subsidies and product innovation are driving sales growth.
Negative previews are highly concentrated in sectors facing downturns. The positive preview rate for the oil & gas and consumer fuels sector is only 17%, mainly due to lower average energy prices in 2025; real estate (17%) is constrained by shrinking sales and ongoing asset impairments; air freight and logistics (17%) faces dual pressures of falling demand and intensifying competition; beverages (16%) are impacted by weak high-end demand; and diversified retail (16%) is weighed down by commercial real estate investment losses and declining rental income.
Early signals from the earnings season show many industry leaders delivering better-than-expected results. The banking sector is demonstrating a strong recovery. China Merchants Bank, Bank of Nanjing, Industrial Bank, China CITIC Bank, and Shanghai Pudong Development Bank all exceeded expectations, with recovering net interest income being a key growth driver. The K-12 education sector posted significant gains. Both New Oriental and TAL Education Group surpassed forecasts, with TAL's non-GAAP operating profit reaching $104 million, approximately four times the market consensus expectation. JPMorgan Chase points out that the current earnings season is still in its early stages. As more companies report, market understanding of industry divergence and leading companies' capabilities is expected to deepen further.