Shareholders cash out of China stocks

Amid improving market conditions and government efforts to boost the economy.

Shareholders in some Chinese companies have cashed out more than $1 billion from their holdings in the past week, taking advantage of improving market conditions brought on by an adrenaline shot to the country’s economy.

Internet investing firm Prosus has sold its entire stake in online travel agency Trip.com in a $743 million block trade, Bloomberg News has reported. Chinese search engine Baidu Inc later sold $534 million in the company’s American depositary shares. Last week, entities tied to DCM Ventures sold their entire stake in Kuaishou Technology for $477 million. A group of pre-IPO holders of Sichuan Kelun-Biotech Biopharmaceutical Co. also raised $49 million.

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Read: Prosus is said to have fully exited stake in China’s Trip.com

“The market has proven the ability to take big deals,” said Edward Byun, co-head of equity capital markets for Asia excluding Japan at Goldman Sachs Group.

The share sales come as the Chinese government is rolling out more measures to help the economy. The country is considering injecting up to 1 trillion yuan ($142 billion) of capital into its biggest state banks to increase their capacity to support the struggling economy, Bloomberg News reported Thursday. The central bank’s governor this week cut a key short-term interest rate and announced plans to reduce the amount of money banks must hold in reserve to the lowest level since at least 2018.

The benchmark CSI 300 index of mainland Chinese stocks gained for a seventh straight session Thursday. Hong Kong’s Hang Seng Index has risen roughly 17% this year.

“Given its relatively high valuation compared to other Chinese ADRs, profit taking at this stage is understandable,” Billy Qi, an analyst at 86Research, said of recent divestments in Trip.com shares. “This is unlikely to exert prolonged pressure on the stock.”

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Secondary share sales in Chinese companies have raised $6.4 billion this year, according to data compiled by Bloomberg. That eclipses the $2 billion and $3.5 billion raised in all of 2022 and 2023, respectively.

The recent deals came about a month after Walmart Inc. unwound its eight-year partnership with Chinese e-commerce company JD.com Inc., selling its entire holding for $3.6 billion.

Foreign investors pulled a record amount of money from China in the second quarter of this year, likely reflecting deep pessimism about the world’s second-largest economy. The slowdown in China and rising geopolitical tensions have led some companies to reduce their exposure.

© 2024 Bloomberg

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