(Bloomberg) -- Optimism is growing among market watchers that efforts by Beijing to revive China’s economy will translate into a boost for the bottom line of its heavily-battered companies.

About 40% of MSCI China Index members that have reported earnings so far for the quarter ended March have beaten analyst estimates. That’s versus 39% for the full previous results season, according to data from Bloomberg Intelligence. Though modest, the gain marks a second straight quarter of improvement in EPS beats.

“Consensus growth expectations for 2024 seem to be bottoming out,” BI analyst Marvin Chen said. “China tech earnings have helped lift the outlook and growth should pick up in the coming quarters due to policy support.”

The growing profit optimism comes amid a flurry of pro-growth signals in recent weeks from Chinese authorities, who are seeking to revive an economy hurt by a housing crisis and weak consumer confidence. Top leaders have hinted at measures to reduce property inventory — with Beijing mulling a plan for local governments to buy millions of unsold homes. The nation also plans to sell 1 trillion yuan ($138 billion) of ultra-long special sovereign bonds to raise funds to support the economy.

The measures are providing investors more reasons to bet that the rebound this year in Chinese stocks will extend. The MSCI China Index has rallied almost 29% since a January low, thanks also to a return of overseas funds. A gauge of Chinese shares listed in Hong Kong has entered a technical bull market, while the onshore benchmark CSI 300 Index is approaching the same.

Cheap valuations are also a draw, with HSBC Holdings Plc. and Goldman Sachs Group Inc. expecting the gains to continue in the coming months. Some market watchers are pinning hopes on a pickup in property demand to drive momentum.

“We expect downward earnings revisions for A-shares to be closer to their end than the beginning” as demand could have a further recovery from supportive property policies, Steven Sun, head of research at HSBC Qianhai Securities Ltd., wrote in a note.

That’s not to say the property sector is out of the woods. All developers in the MSCI China Index trailed expectations in the March quarter, with the materials sector being another drag. While real estate shares have rallied strongly in recent weeks, further gains will depend on how earnings play out.

Technology giants such as Tencent Holdings Ltd., Baidu Inc. and JD.com Inc. have also helped sustain momentum in Chinese equities in recent weeks. Xiaomi Corp., Bilibili Inc. and NetEase Inc. are among tech firms due to announce earnings on Thursday. Companies accounting for 82% of MSCI China Index’s market value had reported results as of Tuesday. 

Tech results can help shape foreign investors’ sentiment for Chinese equities as they are most exposed to these firms, according to BI’s Chen.

“Given that they are also the largest constituents in the indexes, as long as sentiment remains positive on the sector, the overall momentum can be sustained,” he said.

--With assistance from Catherine Ngai.

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