SHANGHAI/BENGALURU (Reuters) – A sharp rally in Chinese stocks this year has been driven more by investor optimism than fundamentals, based on an analysis of corporate earnings estimates in an economy expanding at its slowest pace in 28 years.

As the 2018 earnings reporting season begins for mainland firms, analysts are issuing more downgrades than upgrades for corporate earnings, even as they hope that China’s stimulus plans for the economy kick in.

That implies that investors who have pushed the market up 22 percent this year are hoping for a turnaround in earnings, which often lags share prices.

China has promised billions of dollars in tax cuts and infrastructure spending to help businesses and protect jobs. Hopes of a deal with the United States to end a year-long trade war have also boosted stock prices.

Beijing has vowed to use more policy tools to ensure the economy grows within a targeted range of 6.0 to 6.5 percent.

“The impact from Beijing’s tax cuts and expenses reductions in 2019 will be between 150-400 billion yuan ($22.37-59.64 billion) on the A-share market, accounting for 4-9 percent of their net profits,” investment bank China International Capital Corporation Limited (CICC) said in report.

Those supportive measures will systematically improve the profitability of Chinese companies, CICC said.

As companies this month release their annual results for 2018, investors need to see prospects for improved profitability to push the market any higher.

“It’s a misperception that solid fundamentals are not needed for a bull run, which is now in its first stage, and the signal for the second stage will be earnings growth recovery after bottoming out,” Haitong Securities wrote in report.

The rebound has been led by the financial sector, which President Xi Jinping has labeled a key part of China’s core competitiveness and Beijing has vowed to liberalize further.

Some financial firms have posted hefty earnings. Ping An Insurance Group said it would return up to 10 billion yuan to shareholders through its first share buyback after a forecast-beating jump in annual profit.

Yet estimates for the sector have not been marked higher.

Consumer firms are also expected to gain from measures to boost consumption. Liquor makers have been pushed to record highs by investors, including foreigners who have long favored firms with strong brand names and solid profits.

Shares of Fuling Zhacai, dubbed one of China’s “super brands”, hit a new high after it reported strong profit growth in 2018 and expected a 26 percent revenue gain in 2019.

Investors are also tracking mainland-listed tech firms as Beijing seeks to reduce dependence on foreign technology to counter U.S. curbs on China’s tech advancement.

Xiaomi-backed TCL Corp reported strong 2018 earnings, sending its stock up nearly 70 percent this year.

Market participants believe a new technology board in Shanghai will help improve the valuations for tech firms already listed on the A-share market.

Shenzhen’s Nasdaq-style start-up board index Chinext has soared 32 percent this year. That compares with a 15 percent rise for Nasdaq in the same period.

Still, given how far some companies have missed their earnings’ estimates in 2018, analysts are reluctant to upgrade their forecasts until they see a decisive turn in profitability.

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