After Warren Buffett’s Berkshire Hathaway reduced its interest in the Chinese electric car manufacturer on Wednesday, the company’s Hong Kong-listed shares of BYD fell. According to one fund manager, this could be an indication that there would be further declines in the company’s stock price.
According to a filing on the Hong Kong exchange, the conglomerate slightly decreased its shares from 20.04% to 19.92%. The conglomerate now holds 218.7 million shares after Berkshire sold 1.33 million shares of BYD for nearly $47 million, according to the filing.
“This is a common trend for investors starting to take cash from the market,” Atlantis Investment’s chairman and chief investment officer, Yang Liu, stated this on Wednesday’s episode of “Squawk Box Asia” on CNBC.
“Maybe we’ll see more.”
According to Refinitiv statistics, BYD shares had a more than 12% decline during the trading session on Wednesday in Hong Kong, ranking as the Hang Seng Index’s worst performance. In the last ten years, the stock’s price has increased by more than 600%.
The business released impressive first-half 2020 results earlier this week, with net income for the period exceeding 3.6 billion yuan ($521 million), more than tripling from the same period last year.
Liu responded that Berkshire’s most recent action may have implications for the Chinese market for electric vehicles when asked about what this means “warning signs that the market may be [coming] to a big correction.”
“There is too much uncertainties and I think [Buffett] got a little bit nervous,” she said. “Maybe this recession in front of us for the U.S. economy and also a weaker Chinese consumption altogether brings down investors’ confidence to a larger scale.”
Space for more China’s new stimulus
In light of the impending National People’s Congress in China in October, Liu stated that there is still potential for additional government stimulus programs and that the current package is “not enough.”
As the nation attempts to revive its economy, which has been pummeled by Covid lockdowns and a real estate crisis, the State Council of China last week unveiled a raft of stimulus measures costing tens of billions of dollars.
“There is room for government to help the economy and push up confidence,” as per the fund manager.
In order “to see what’s going on”, she said, people will be looking for hints in the government’s growth forecast.
“It will give us a big indication [on] where China’s economy will go,” she mentioned a few things, such as the government’s zero-Covid policy’s direction and the steps that will be made to address low consumption.
“The economy needs confidence to believe, it’s now all about the confidence,” Liu added.