A-share 2Q26 earnings pressure eases, MSCI China earnings signals strengthen

Overview

This report is Morgan Stanley's strategy research on 2Q26 earnings pre-announcements and earnings forecast revisions for Chinese equities. The report covers A-share and MSCI China samples, with the core conclusion that earnings pressure has eased significantly versus 4Q25, especially as MSCI China earnings pre-announcement signals have strengthened; however, consensus EPS is still seeing a slight net downward revision, and divergence across sectors and market-cap styles still warrants attention.

Core views

First, A-share 2Q26 earnings pre-announcements improved significantly, with the net negative ratio by company count narrowing from -14.8% in 4Q25 to -4.5%, while by market cap it improved to +17.0%. Second, MSCI China 2Q26 pre-announcements are stronger, with the net positive ratio reaching +17.7%, led by materials, energy, IT, and financial sectors. Third, 2026 consensus EPS revisions remain slightly negative, but the breadth of downward revisions has narrowed versus 4Q25. Fourth, real estate, autos, software, healthcare, household products, and staples remain the main drags.

Analysis framework

The report breaks down earnings pre-announcements along two dimensions—company count and market cap or index weight—and compares them with 4Q25; at the same time, it combines 2026 consensus EPS upgrades or downgrades of more than 1% during the period from May 31, 2026 to July 21, 2026, the MS Preview to Earnings framework, and Morgan Stanley stock ratings to form positive and negative stock screens ahead of earnings season.

Methodology notes

• Earnings pre-announcement breadth analysisNet positive/net negative pre-announcement ratio

  Measures the direction of earnings signals using the difference between the number of companies with positive pre-announcements and those with negative pre-announcements.

  The A-share sample is measured by company count and market cap, while the MSCI China sample is observed by company count and index-weight-related metrics, to judge whether earnings pressure is increasing or easing.

• Earnings forecast revisions2026 consensus EPS revision breadth

  Calculates the difference in the proportion of companies or weights with consensus EPS upgrades of more than 1% and downgrades of more than 1% during the assessment period.

  The report uses consensus data such as IBES and Rimes from May 31, 2026 to July 21, 2026 to assess whether earnings expectations continue to be revised down or are showing improvement.

• Earnings preview frameworkMS Preview to Earnings

  Systematically labels earnings previews across three dimensions: key KPIs to watch, the direction of KPI surprises, and the potential impact on consensus EPS.

  This framework is used to identify companies that may deliver upside or downside surprises ahead of earnings season, and it is incorporated into the screening together with pre-announcements, earnings revisions, and ratings.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• A-shares

  One of the core covered markets, where the report uses 2Q26 earnings pre-announcements to gauge changes in earnings pressure.

  Strengths

  The net negative ratio has narrowed significantly, turning into a relatively strong net positive by market cap, with greater resilience among large caps.

  Weaknesses

  By company count it remains -4.5% net negative; small and mid caps have improved but have not yet fully turned positive.

  Comparison

  Significantly improved versus 4Q25, with large caps outperforming mid caps and small caps.

  Risks

  Pre-announcements cover about one-third of the market, and companies that have not released pre-announcements may alter the overall earnings assessment.

• MSCI China

  A key index sample in the report, used to measure earnings signals for offshore China and related large-cap stocks.

  Strengths

  The 2Q26 pre-announcement net positive ratio reached +17.7%, significantly above +5.5% in 4Q25.

  Weaknesses

  2026 consensus EPS still shows net downward revisions, indicating that earnings expectations have not yet fully reversed.

  Comparison

  Compared with the -4.5% by company count for A-shares, MSCI China pre-announcement signals are stronger.

  Risks

  Pre-announcement samples cover only about 13% of index weight, and Hong Kong stock disclosure cadence is mainly semiannual.

• Materials, energy, IT, and financial-related sectors

  Sectors where positive earnings signals are concentrated.

  Strengths

  They lead in net positive ratios within MSCI China pre-announcements, while insurance, financial services, materials, technology hardware, and energy also stand out in A-shares.

  Weaknesses

  Some sectors may have already reflected market expectations, and it remains necessary to observe whether earnings upgrades can continue.

  Comparison

  They have stronger earnings momentum than real estate, autos, and parts of the consumer sectors.

  Risks

  Cyclicals and technology hardware may be affected by commodity prices, demand cycles, and valuation volatility.

• Real estate, autos, consumer, and healthcare-related sectors

  The main pressured areas identified by the report.

  Strengths

  If policy or demand improves later, they may have rebound potential.

  Weaknesses

  Real estate, autos, software, healthcare, household products, and staples are weak in pre-announcements or earnings revisions.

  Comparison

  Clearly weaker than positively revised sectors such as materials, energy, financial services, and transportation.

  Risks

  Continued earnings downgrades, insufficient demand recovery, and valuation compression may continue to weigh on performance.

Key data

• A-share 2Q26 pre-announcement coverage1,733 companies; about 33% of A-share listed companies and 34% of market capAs of July 20, 2026.
• A-shares net pre-announcement ratio by company count-4.5%Improved from -14.8% in 4Q25, but still slightly net negative.
• A-shares net pre-announcement ratio by market cap+17.0%Improved from +5.5% in 4Q25.
• Large-cap net pre-announcement ratio+7.2%Turned positive from -5.5% in 4Q25.
• Mid-cap net pre-announcement ratio-14.6%Improved from -27.6% in 4Q25.
• Small-cap net pre-announcement ratio-5.4%Improved significantly from -32.9% in 4Q25.
• MSCI China pre-announcement coverage166 companies; about 29% of company count and 13% of index weightAs of July 22, 2026.
• MSCI China net positive pre-announcement ratio+17.7%Strengthened from +5.5% in 4Q25; 134 companies positive and 32 companies negative.
• 2026 consensus EPS revision coverage278 companies; about 48% of MSCI China index weightAssessment period is May 31, 2026 to July 21, 2026, with revisions greater than 1%.
• MSCI China EPS revisions by company countnet 2% downward revisionNarrowed versus the net 10% downward revision in 4Q25.
• MSCI China EPS revisions by index weightnet 3% downward revisionNarrowed versus the net 10% downward revision in 4Q25.
• Positive screening results16 stocksBased on no negative 2Q26 pre-announcements, upward 2026 earnings forecast revisions, no negative Preview to Earnings surprises, and an Overweight rating.
• Negative screening results14 stocksBased on no positive 2Q26 pre-announcements, downward 2026 earnings forecast revisions, no positive Preview to Earnings surprises, and an Underweight or Equal-weight rating.

Impact & implications

The report's implication for Chinese equities is that downward earnings pressure is easing, especially with stronger signals from MSCI China and large-cap A-share companies, which may support a recovery in risk appetite ahead of earnings season; however, consensus expectations have not yet turned comprehensively positive, and weak sectors related to real estate, autos, consumer, and healthcare may limit upside at the index level. From an investment perspective, it is more appropriate to focus on structural positioning around stocks supported by positive earnings pre-announcements, upward earnings forecast revisions, and ratings, rather than simply adding broad market exposure.

Risks

• Earnings pre-announcement coverage is limited, and undisclosed companies may cause the final earnings season results to diverge from the pre-announcement sample.
• The MSCI China sample covers about 13% by index weight and cannot represent the final earnings results of the entire index weight.
• Consensus EPS still reflects net downward revisions, and earnings improvement has not yet fully translated into broad-based analyst upgrades.
• Sector divergence is pronounced, and weakness in real estate, autos, consumer, and healthcare-related areas may weigh on the overall market.
• The stock screens in the report rely on four categories of conditions—pre-announcements, earnings revisions, Preview to Earnings, and ratings—and any change in a single category may affect the screening conclusions.

What to watch

• Whether formal 2Q26 earnings releases validate the improvement in A-share pre-announcements and the net positive signal in MSCI China.
• Whether the breadth of 2026 consensus EPS revisions can shift from slight net downward revisions to net upward revisions.
• Whether earnings upgrades in positive sectors such as materials, energy, IT, financial services, insurance, and transportation can continue.
• Whether weak sectors such as real estate, autos, software, healthcare, household products, and staples continue to see downgrades.
• How the 16 positively screened stocks and 14 negatively screened stocks actually perform during earnings season.