Investors are wary that the Chinese New Year holiday spending may not be enough to reignite a rally
Published Sun, Feb 15, 2026 · 10:20 AM
A WORSENING earnings picture is darkening the outlook for Chinese equities, leaving investors wary that Chinese New Year holiday spending may not be enough to reignite a rally.
Corporate profit pre-announcements have shown a “major deterioration” for the last quarter of 2025, a Morgan Stanley analysis showed.
The latest economic indicators underscore weak consumer demand as some government stimulus programmes are scaled back, according to Nomura Holdings.
These factors are fuelling concern the nine-day holiday will fail to deliver its typical boost to earnings as the economic uncertainty continues to erode consumer spending.
“Sentiment on Chinese stocks is going through a weak patch,” said Vey-Sern Ling, managing director at Union Bancaire Privee in Singapore.
That is “partly because investors are unwilling to take risks before the long holidays, and also because of a lack of new catalysts, seemingly heightened regulatory scrutiny recently, and continued intense competition”.
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The MSCI China Index rose just 0.8 per cent this year, while the MSCI All World Index gained 2.8 per cent. The contrast is starker within Asia: South Korea’s key gauge surged 31 per cent and Taiwan’s jumped 16 per cent.
Earnings season shaping up to be a disappointment
China’s earnings season is already shaping up as a disappointment. Fourth-quarter pre-announcements from more than 2,000 mainland-listed A-share companies show negative alerts outnumber positive ones by 14.8 per cent, versus a net negative 4.8 per cent in the second quarter, according to Morgan Stanley.
Smaller firms fared worst – particularly in real estate and consumer-focused sectors – strategists including Chloe Liu and Laura Wang wrote in a note this month.
Slowing economic growth is a key drag on profits. China’s growth cooled to 4.5 per cent last quarter, from a year earlier, the weakest pace since the country reopened from Covid lockdowns in late 2022. Producer prices fell 1.4 per cent in January from a year ago, extending a deflationary streak that began in late 2022, while purchasing managers’ indexes signaled an unexpected slowdown.
“The significant miss in both manufacturing and non-manufacturing PMIs suggests insufficient underlying demand,” Lu Ting, chief China economist at Nomura in Hong Kong, said this month. “Consumption is facing clear headwinds from the scaled-back trade-in stimulus programme this year.”
Economic data may take a back seat in the coming weeks as the statistics bureau typically combines January and February figures to smooth out distortions caused by the irregular timing of the Chinese New Year holiday. Major policy announcements are also unlikely before the National People’s Congress in March.
Increased regulatory intervention is adding to market caution. Authorities last month tightened margin financing rules in an effort to curb speculative trading and reduce the risk of future boom-and-bust cycles.
Diverging growth
At the same time, earnings are diverging sharply across industries, complicating stock selection.
Metal miners are benefiting from surging prices, while companies in the artificial intelligence supply chain and firms supported by the government’s campaigns to rein in a price war are also gaining favour, according to a report from China Merchants Securities Co.
Miner CMOC said last month its preliminary net income jumped about 50 per cent for the full year, while software maker Iflytek reported a gain of between 40 per cent and 70 per cent for the same period. In contrast, shares of electric-vehicle makers BYD and Great Wall Motor both slumped following lacklustre January sales numbers.
Overall A-share earnings are expected to have grown about 6.5 per cent year on year for 2025, compared with a drop of 3 per cent for 2024, according to China International Capital Corp. China Merchants Securities also predicts single-digit growth.
The profit increase is “largely attributable to policy support and cyclical factors, rather than signalling a fundamental or structural shift in market conditions,” said Shen Meng, a director at Beijing-based investment bank Chanson & Co. BLOOMBERG
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