By Lee Chyen Yee and Meg Shen
SINGAPORE/HONG KONG (Reuters) - China's companies are forecast to turn in their biggest earnings increase in four years in 2014 as strong growth in the consumer, energy and industrial sectors propels overall profit at mainland-listed firms 19 percent higher than a year earlier.
The expected improvement from an already solid 2013 showing comes as Beijing seeks to steer the world's second-biggest economy to a consumption-led model from reliance on trade. Just completed earnings reports for January-December 2013 showed overall income climbed 13.8 percent, boosted by consumer goods, materials and information technology firms.
The consumer discretionary, energy and industrial sectors together make up around a quarter of total earnings for mainland Chinese firms. They are expected to see 2014 net profit grow by an average of 42 percent, 5 percent and 44 percent respectively in 2014, according to Thomson Reuters data based on analysts' forecasts for more than 1,500 Shanghai and Shenzhen-listed companies.
"Areas that we expect to do a little bit better obviously are the consumer area. That's a big focus for the government to try and re-balance the economy," said Steve Brice, chief investment strategist at Standard Chartered Bank in Singapore.
The three sectors, which comprise big names like oil and gas firm PetroChina Co Ltd and airline Air China Ltd, as well as Peking duck restaurant chain China Quanjude Group Co Ltd, are expected to log the fastest profit rises since 2010.
BETTING ON CONSUMERS
Companies such as Air China and highway operator Shenzhen Expressway Co Ltd, as well as Beijing Wangfujing Department Store Group Co Ltd and home appliances maker Midea Group Co Ltd are all expected to see better profit growth this year, Thomson Reuters data showed.
"Consumers have been a long-term source of strength in the economy and there are still some cheap parts of the consumer market that we think you could find as an investor," said Stuart Rae, chief investment officer at AllianceBernstein, a qualified foreign institutional investor in China.
At financial and utilities companies, though, slower growth is expected this year. China's easing economic growth is bringing caps on lending at banks, while government policies like electricity grid tariff cuts are weighing on power firms' bottom lines.
The financial sector, which contributes more than half of overall earnings among mainland-listed companies, is expected to post an average net profit growth of 10.3 percent in 2014, according to Thomson Reuters data.
That growth in financials, which consists of names like Industrial and Commercial Bank of China Ltd and China Life Insurance Co Ltd, will be the slowest in six years.
"The weaker economy is expected to sap demand for fund-raising, which will cast a shadow on banks' earnings this year," said Cao Xuefeng, head of research at Huaxi Securities in Chengdu city, capital of Sichuan province.
(Reporting by Lee Chyen Yee in SINGAPORE and Meg Shen in HONG KONG; Additional reporting by Patturaja Murugaboopathy in BANGALORE in Andy Ho in SINGAPORE; Editing by Kenneth Maxwell)