Hong Kong-listed companies are predicting more earnings declines than ever before as the slowing mainland economy curbs demand for goods and services.

The number of companies that have predicted lower profit or a loss for a specific period has reached 331 since the start of June, the most for a three-month time frame since Hong Kong Exchanges & Clearing Ltd Started compiling the data in July 2007.

"Most of the companies that warned about profits have large exposure on the mainland," said Linus Yip, chief strategist at First Shanghai Securities in Hong Kong. "Corporate earnings in the third quarter will definitely be worse than a year earlier because of the slowdown in the economy. Any rebound would depend on what stimulus may come out of China. It would be hopeless to rely on a recovery in European markets."

The 1,531 companies traded in the city have to disclose any change in expected financial performance likely to lead to "substantial price movement" in shares, according to exchange regulations. The profit warnings since May relate mainly to earnings during the first six months. Of a record 138 companies that issued such statements last month, 79 percent derive more than half their revenue from the Chinese mainland, while 45 percent are industrial-related or commodity producers, according to data compiled by Bloomberg.

China's economy expanded at the slowest pace in three years last quarter as Europe's debt crisis hurt exports and a government drive to cool inflation damped domestic demand. At the same time, spending on mainland factories, real estate and equipment grew 20.4 percent this year through June, the weakest expansion for the period since 2001. Fixed-asset investment contributed 49 percent of gross domestic product in 2011, according to the nation's statistics bureau.

Companies from Angang Steel Co to Gome Electrical Appliances Holding Co, China's second-biggest electronics retailer, said in statements last month they would report a loss for the first half of 2012 amid falling prices and declining demand. Hong Kong-listed companies have until the end of August to report earnings for the six-month period.

(HK Edition 08/25/2012 page2)