US-listed Chinese Tech Stocks Take Dive Following Trade Stalemate

Traders work on the floor of the New York Stock Exchange while the price of Alibaba Group's initial price offering (IPO) is decided in New York City on Sept. 19, 2014. (Andrew Burton/Getty Images)

Scores of Chinese high-tech companies listed on U.S. exchanges are seeing their stock prices fall in recent weeks, as uncertainty surrounding U.S.-China trade talks have caused U.S. investors to lose confidence in their potential.

Some of China’s largest tech firms, such as Alibaba, Baidu, Sina, JD.com, ZTE, Tencent, and Xiaomi, have all seen their market value shrink.

China’s state-run Securities Times, citing statistics from financial data service company Tonghuashun iFinD on May 26, stated that 217 Chinese listed companies have lost $234.4 billion in value within the past month.

Alibaba

Alibaba listed on the New York Stock Exchange (NYSE) in September 2014, and raised $25 billion in its initial public offering (IPO), which was the largest in NYSE history at the time.

On May 28, Alibaba shares closed at $154.81, down 0.14 percent from the previous day’s trading.

Alibaba’s stock price had been higher than $200 per share in June 2018. Around that time, shares began to drop, as China finalized its tariff list in retaliation to U.S. levies on Chinese goods.

On Jan. 3, the stock price fell to $130.60, the lowest in the past 12 months.

As trade negotiations between China and the United States resumed, its prices started to increase steadily—until May 3, when prices fell again, to $195.21 per share, after speculation that the upcoming trade talks may not end with a signed agreement.

On May 5, U.S. President Donald Trump announced via Twitter that he would escalate tariff rates on $200 billion worth of Chinese goods, citing slow progress in talks. Days later, U.S. officials said that the Chinese regime had reneged on prior commitments discussed during negotiations.

Alibaba issued 1.37 billion shares at the NYSE, which means the value of Alibaba fell by $55.35 billion from May 3 to May 28.

Other Chinese Tech Stocks

Baidu, China’s most popular search engine and one of the largest AI and internet companies in the world, is facing similar challenges.

Baidu listed on the Nasdaq exchange in August 2005, and raised $109 million in its IPO, which was then the largest initial offering by a Chinese company overseas.

Baidu stock prices were higher than $240 per share in June and July 2018, but has gradually fallen to $114.14 per share at closing on May 28.

Tencent, the developer of China’s most popular social media platforms, WeChat and QQ, has listed on U.S. over-the-counter markets.

In recent months, Tencent stock prices were around $50 until May 3, when they began dropping.

Tencent shares closed at $41.12 on May 28.

Similar trends occurred with Sina, developer of China’s Twitter-like service Weibo; Chinese e-commerce giant JD.com; and Ctrip, China’s largest online travel company.

U.S.-China Tech War

Stock prices represent market confidence in a company. China, Hong Kong, and U.S. stock markets have responded to the latest developments in the U.S.-China trade war via the Chinese technology companies’ stock prices, Gao Shanwen, the chief economist at China Essence Securities, said during a May 16 company strategy conference.

“The Chinese economy is slowing, due to falling consumption as a result of the trade war,” Gao said. He explained that tech companies’ products are servicing consumers. But investors are worried that Chinese consumers wouldn’t buy as much as before, as ripple effects from the trade tariffs take a further toll on the already-slowing economy.

Already in 2018, retail sales in China grew at the slowest rate in 15 years.

“The [tariff] burden would be shouldered by Chinese listed companies in China and overseas. Their total estimated losses will be 58 times that of investment,” Gao predicted.

Tang Hao, a U.S.-based China affairs commentator, wrote in a May 28 commentary published in the Chinese-language Epoch Times that the U.S.-China trade dispute has already escalated into the realm of high-tech, after the Trump administration placed Chinese telecom giant Huawei on a blacklist that prohibited it from doing business with U.S. firms.

“Last week, the U.S. administration was said to be considering sanctions on the Chinese surveillance camera manufacturers Hikvision and Zhejiang Dahua Technology. It looks like we are on the cusp of a technology war,” Tang said.