US$3 billion blunder: Walmart, Prosus, Tencent miss the China rally with premature exits

Beijing's big-bang stimulus may have restored more than US$3 trillion of value to Chinese stocks, but not everyone has been lucky enough to reap that windfall, especially those who timed their exit before the rally took hold.

Retail giant Walmart sold 144.5 million of JD.com's US-listed shares at US$24.95 each last month, missing out on potential gains of US$2.8 billion had it held on to its stake for another three weeks.

Global investment firm Prosus, which dumped 14.5 million shares of Trip.com at US$51.40 each in a block trade last week, would have been better off by US$225 million. Baidu, too, lost out on additional gains of US$123 million from the sale of 10.5 million shares in the travel agency last week.

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Tencent Holdings might also be regretting not holding onto its stake in Futu a little longer. The internet giant sold its stake last week before a 34 per cent surge in the online broker's share price, leaving potential gains of US$85 million on the table.

These badly timed exits have led to missed opportunities of more than US$3.3 billion, underscoring how Beijing's massive stimulus package caught China bears off guard. A 27 per cent rally in the CSI 300 Index, which tracks the performance of the 300 largest stocks on the Shanghai and Shenzhen bourses, has put the squeeze on short-sellers, costing them US$6.9 billion in mark-to-market losses, according to an estimate by S3 Partners.

A bull statue along the Bund in Shanghai. Beijing's stimulus has restored more than US$3 trillion in market value to Chinese stocks. Photo: Bloomberg alt=A bull statue along the Bund in Shanghai. Beijing's stimulus has restored more than US$3 trillion in market value to Chinese stocks. Photo: Bloomberg>

In total, more than US$3 trillion in market value has been restored in Chinese stocks since Beijing unveiled its biggest stimulus bazooka to stop a rot in the property and stock markets. That has also helped China reclaim the biggest share of weight in the MSCI Emerging Markets Index at 27.8 per cent, according to Bloomberg estimates, up from 24.4 per cent in August.

"China's stimulus is fast and furious. The scope and timing of this package caught many investors off guard," Mark Mobius, the legendary emerging markets fund manager, wrote in a blog post this week.

"The sheer scope of the measures has provided a surge of confidence in the markets, and many investors - who had been waiting for a reason to jump back in - have seized the opportunity" driven by fear of missing out and cheap valuations, he added.

It remains to be seen whether the current rally could turn into a sustained recovery in Chinese stocks, with the MSCI China Index still 45 per cent lower than the 2021 peak. Lingering concerns about the nation's economic growth, regulatory uncertainties and geopolitical tensions could still pose risks to investor confidence.

However, bad news could be good news for Chinese stocks going forward, according to BCA research.

"In the near term, further evidence of weak economic performance could spur further equity gains, as they would prompt the expectation for additional policy support," BCA analysts said in a note earlier this week.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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