R&D thrust marks H1 fine show of A-share firms

A-share companies' better-than-expected financial results in the first half and improved strength in research and development reflect the vitality and resilience of China's economy, experts said.

As of Wednesday, 4,825 A-share companies have released their financial results for the first half, with their combined sales revenue up 9.24 percent year-on-year to exceed 34.5 trillion yuan ($5 trillion), said the China Association for Public Companies.

Their total net income climbed 3.19 percent year-on-year to 3.25 trillion yuan, with the second-quarter performance beating market expectations, the association said.

The income growth rate of industrial companies, best represented by those in chemical, power battery material and photovoltaic sectors, started to overtake that of financial services providers since the first quarter till now, indicating that the real economy has played a bigger role in driving China's economic growth, the association said.

Development reported by companies from strategic emerging industries has become a highlight in the first six months, experts said.

Of all the 446 STAR Market companies that have released their first-half results, more than 53 percent reported growth in net profit, according to market tracker Wind Info.

There are also 61 of them seeing net profit growth exceeding 100 percent. Digital equipment, semiconductor and new energy companies reported the strongest growth.

The increasing inclusiveness and adaptability of the STAR Market, which is to facilitate the development of "hard technologies" such as integrated circuits and biomedicine, has showcased the capital market's strength in serving technological advancement, said Yi Huiman, chairman of the China Securities Regulatory Commission, on the STAR Market's third anniversary in late July.

Companies listed on the Beijing Stock Exchange, which started trading on Nov 15 and is focused on nurturing technologically advanced small and medium-sized enterprises, reported their first-half results at the end of August. Nearly 90 percent of the 106 BSE-listed companies reported profits. Six companies, including lithium cell provider BTR New Material and chemical provider Nutrichem Co Ltd, reported half-year net profits of over 100 million yuan.

Fu Lichun, chief economist of YTI Capital, said high-tech companies, including those from the new energy, new materials and biomedicine sectors, are expected to maintain robust growth in the following months.

Of all the 4,391 A-share companies with comparable data, 1,358 saw their R&D investment surge more than 30 percent year-on-year in the first six months, among which 316 have doubled their R&D expenditure. Some 73 companies spent over 1 billion yuan each on R&D.

Supportive policies like favorable tax and special funds to advance China's technological innovation in general have encouraged companies to invest more in R&D, said Chen Li, chief economist of Chuancai Securities. Companies have also realized that they are more competitive only when more R&D investment is made, he said.

In all, 37 companies delisted in the first half－a record. Their number exceeded the combined number for 2020 and 2021. The more normalized delisting mechanism and stricter adoption of delisting regulations have improved the quality of the capital market so that it can serve the real economy more efficiently, said Ren Lang, an analyst at Kaiyuan Securities.

The Shanghai Composite Index shed 0.78 percent on Wednesday, while the Shenzhen Component Index closed 1.28 percent lower. However, trading has been vibrant in the A-share market, with total trading value exceeding 1 trillion yuan on Wednesday.