Analyst: Investors get some gains before Chinese stocks disappear
New analysis
Foreign investors are cashing in on their gains in Chinese stocks as the outlook for the Chinese economy, especially in the technology sector, continues to bleed, fearing their values could plummet further. Meanwhile, some investors are eyeing Taiwanese technology companies.
Warren Buffett’s investment firm Berkshire Hathaway has cut its stake in Chinese electric vehicle (EV) conglomerate BYD six times in less than four months, while Taiwan Semiconductor Manufacturing Co. acquired stock.
On December 8, Berkshire Hathaway sold 1,329,500 shares of BYD at an average price of HK$201.3432 (about $26) per share for HK$267.7 million (about $3,440), according to Hong Kong Stock Exchange (HKEX) data. million dollars) cashed out.
In less than four months, Berkshire Hathaway has sold a quarter of its stake in BYD.
Buffett bought 225 million shares of BYD for $232 million in 2008 and has never sold or reduced his stake in the past 14 years. Recently, the company’s stock jumped 33 times his price, bringing its market capitalization to his $7.7 billion.
However, Buffett sold BYD stock six times in a row on August 24th, September 1st, November 1st, November 8th, November 17th and December 8th.
Berkshire Hathaway’s current stake in BYD was reduced from 20.04% in August to 14.97%.
It’s currently unclear why Buffett has reduced his stake in BYD. But just a week before Buffett cut his stake in BYD for the first time, on Aug. 16, U.S. President Joe Biden signed the Inflation Reduction Act (IRA) into law. .
The law stipulates that electric vehicles must have batteries made from minerals mined or recycled in North America to qualify for federal tax credits. And by 2024, at least 50% of EV batteries will need to be sourced from the US, Canada or Mexico, a figure he said will rise to 100% by 2028.
These rules are believed to be aimed at curbing China’s electric vehicle supply chain. According to the International Energy Agency (IEA), Chinese companies now hold more than half of the processing and refining capacity for lithium, cobalt, and graphite (key components of EV batteries).
The bill is seen as a major blow to China’s electric vehicle and battery companies.
Affected by the IRA, BYD executive vice president Stella Li said on Dec. 6 that the company currently has no plans to sell electric vehicles in the United States, according to Bloomberg.
But BYD is still trying to build a battery factory in the US, the chief executive said.
Li also said the IRA’s requirement to source raw materials from countries with free trade agreements with the United States was “confusing” and would inevitably underestimate Chinese companies.
In addition, BYD’s solar power business is also facing difficulties.
Chinese solar PV maker under tariff avoidance investigation
The US Department of Commerce announced on the 2nd that it had made a tentative decision in a tariff avoidance investigation into four Chinese solar cell makers.
In a preliminary study, four out of eight Chinese solar companies under investigation, including BYD Hong Kong, sent their solar modules to Southeast Asian countries such as Malaysia, Thailand, Vietnam and Cambodia for mining before exporting to the United States. It turned out that he was doing a lot of processing. This is to avoid US tariffs.
The Biden administration announced in June this year that it would exempt import tariffs on solar cells and components from the aforementioned four Southeast Asian countries for two years, but BYD’s move to avoid US tariffs will affect the company’s subsequent development. It is widely expected that
It’s unclear if Buffett will continue to reduce his stake in BYD. But while reducing his BYD holdings, Buffett turned his attention to TSMC, the world’s largest and most advanced chip maker, which produces more than 90% of his chips in the world’s high end.
On November 14th, Berkshire Hathaway announced that it had bought more than $4.1 billion in shares of TSMC.
Berkshire Hathaway acquired over 60 million American Depositary Shares (ADRs) from TSMC in the three months to the end of September this year, according to documents filed with US regulators.
Taiwan’s Foxconn sells Tsinghua Unigroup
Taiwan’s Foxconn Group announced on December 16 that its subsidiary Foxconn Industrial Internet will sell all shares in China’s Tsinghua Unigroup to Yantai Haixiu IC Investment Center.
Five months after its acquisition, Foxconn has decided to sell its entire stake in Tsinghua Unigroup, China’s largest semiconductor manufacturer.
In a separate statement, Foxconn said the company’s move is to avoid uncertainty as the investment has not yet been finalized.
On July 14, Foxconn Industrial Internet indirectly acquired nearly 10% of the shares of Tsinghua Unigroup. But China’s move to invest in state-owned enterprises has sparked a review from the Taiwanese government.
Tsinghua Unigroup is an important semiconductor company in China. Chinese memory chip maker Yangtze Memory Technologies (YMTC), one of the company’s major investments, is among 35 Chinese companies added to the U.S. Entity List, according to the U.S. Department of Commerce on Dec. 15. was contained within.
The recent addition of a major Chinese chip company to a trade blacklist is believed to have increased the US crackdown on China’s chip industry.
On October 7, the US Department of Commerce announced sweeping new export controls aimed at thwarting the military modernization of the increasingly hostile Chinese regime.
Among the new export rules are measures to cut off communist China from cutting-edge chip-making equipment and certain advanced semiconductor chips made with US technology, regardless of whether the chips are made in the US. is included.
Tsinghua Unigroup fell into debt crisis at the end of 2020. The company revealed last July that one of its creditors had asked the courts to initiate bankruptcy and reorganization proceedings due to the group’s failure to repay its debts and apparent bankruptcy.
Stakes in two other Chinese tech giants, Alibaba and Tencent, have also seen big sales this year.
Shares of Tencent and Alibaba plunged as Beijing tightened regulations on Chinese tech companies after ride-hailing giant Didi Chuxing entered the New York Stock Exchange (NYSE) last July. I kept doing it.
The Hong Kong Stock Exchange (HKEX) said on December 16 that Tencent’s largest shareholder, South African media group Naspers, had once again reduced its 993,000 shares in Tencent held on December 13. .
South African internet and media group Naspers acquired a 45.6% stake in Tencent in 2001. Naspers has caused panic in the market by announcing plans to indefinitely cut its holdings in Tencent on June 27 this year.
Tencent’s share price on HKEX has fallen nearly 60% from its February 2021 high.
Japan’s SoftBank Group announced on August 10 that its board of directors has approved a significant reduction in its stake in Alibaba by the end of September this year.
The company sold 242 million Alibaba depositary receipts (ADRs), reducing its stake in the company from 23.7% to 14.6%.
SoftBank Group invested $20 million in Alibaba in 2000. When Alibaba went public in his 2014 stake he was worth $60 billion.
However, in the fourth quarter of 2021, SoftBank began selling a small stake in Alibaba. The company’s reliance on Chinese investments has also significantly decreased due to significant cuts this year.
Alibaba’s market capitalization has fallen two-thirds from its October 2020 high.
The prospects for Chinese tech companies have dimmed in recent years. According to Business Insider, Wall Street analysts believe investors such as Berkshire Hathaway, Naspers and Softbank “want to realize huge gains before Chinese stocks disappear”.
Anne Zhang is a reporter for The Epoch Times, covering China-related topics. She started writing her Chinese version in 2014.
Sean Tseng is a writer based in Taiwan. He focuses on Chinese news.