The U.S.-listed shares of China-based companies traded lower on Friday, with property developer Country Garden Holdings Co.’s financial troubles casting a shadow over the group.
Market Decline and Weak Credit Demand
The iShares MSCI China exchange-traded fund (MCHI) dropped 2.4% in premarket trading, while futures for the S&P 500 (SPX) slipped 0.4%. This decline was exacerbated by the news that new loans issued by banks in China dramatically fell to 345.9 billion yuan (equivalent to $47.93 billion) in July, compared to 3.05 trillion yuan in June. Analysts had expected a decline to 800 billion yuan, indicating weak credit demand.
Economic Downturn and Investor Reaction
China’s economic downturn has been further highlighted by recent data showing the first drop in consumer prices in two years, as well as a larger-than-expected drop in both exports and imports. These factors have contributed to negative investor sentiment towards China-based companies.
Impact on Specific Companies
Nio Inc.’s (NIO) American depositary shares (ADS) dropped 3.6%, while Alibaba Group Holding Ltd.’s (BABA) stock slumped by 2.3% following a surge of 4.6% on Thursday. The Hong Kong-based shares of Country Garden Holdings also suffered a significant dive overnight after the company warned of potential losses amounting to billions of dollars in the first half of the year.
Further Declines
Other China-based companies also experienced stock price declines in the U.S. market. EV maker XPeng Inc. (XPEV) shed 3.5%, video- streaming platform Bilibili Inc.’s (BILI) stock slid 3.4%, e-commerce company JD.com Inc.’s (JD) shares gave up 3.7%, and mobile-marketplace company PDD Holdings Inc.’s (PDD) stock dropped 3.6%. The declines continued with EV makers Li Auto Inc. (LI) and XPeng Inc. (XPEV) losing 3.8% and 5.39% respectively. Real-estate services platform KE Holdings Inc. (BEKE) declined by 3.6%, while transportation-services provider ZTO Express Inc. (ZTO) was down 2.2%.
Summary
Overall, the MSCI China ETF slipped 0.4% over the past three months through Thursday, while the S&P 500 gained 8.2%. The challenging financial situation faced by China-based companies, coupled with the economic downturn in China, has resulted in negative investor sentiment and stock price declines. The future of these companies remains uncertain amid the ongoing financial struggles of Country Garden Holdings Co.
