Stocks in Chinese Online Retailers, Restaurants Fall

China’s domestic market enjoyed a stable Friday overall.

Author: Belinda Zhou   

Shares in China-based restaurant operators, online travel agencies and online retailers were trading poorly in New York midday Friday as the outlook for the coronavirus in China remained uncertain. 

Online retail platform Pinduoduo Inc. (Nasdaq: PDD) dropped nearly 5% Friday morning with 60-day loss of 18% in its stock price. The market capitalization of Pinduoduo almost hit the red line of $40 billion, while stock in another online retailer, Baozun Inc. (Nasdaq: BZUN), declined 5% intraday, wiping out stock value of 28% in the past 60 days.

To compare, the largest two e-commerce giants Alibaba Group Holding Ltd. (NYSE: BABA; HKEX: 9988) and Inc. (Nasdaq: JD) traded down 2% and unchanged intraday Friday. Vipshop Holdings Ltd. (NYSE: VIPS) lost 2% on Friday morning. Since the outbreak of the coronavirus, Chinese citizens have avoided public gatherings, badly hurting restaurants. 

China's fast food chain operator Yum China Holdings Inc. (NYSE: YUMC) kept declining, falling 2% in midday trading Friday. The restaurant behemoth started to close more than 30% of its stores right before the Chinese New Year.

Luckin Coffee Inc.'s (Nasdaq: LK) stock declined more than 4% and then recovered Friday morning, impacted by another 66-page short-selling report on the company. Volatility increased as the fast-growing coffee chain reached one of its record highs in the past seven days, only then to plummet 11% on an 89-page unattributed short-seller report from Muddy Waters Research last Friday. On Tuesday, the stock gained 16%.

Qingdao city-based pet food producer TDH Holdings Inc. (Nasdaq: PETZ) was down 6% midday Friday after it soared 8% Thursday. Its stock price has remained nearly unchanged since early 2020. 

Online travel giant Group Ltd. (Nasdaq: TCOM) was down 1% as of midday.

Liang Zhou, one of China's regulators for the banking system, said Friday that the virus outbreak may negatively impact the restaurant, tourism, and catering sectors in the country with higher non-performing loan ratios. The debt ratio declined to 3.22% in 2019, a year-over-year decrease of 1%. However, more small and micro enterprises are likely to default in 2020, added Zhou.

China's domestic market had a stable Friday. The Shanghai Composite continued to increase 9 points, or 0.33%, to 2,875. The Shenzhen Composite remained almost unchanged, adding 10 points to 10,611. Hang Seng Index in Hong Kong lost 89 points to 27,404, down less than 1%.

The Chinese government took action to boost the economy this week, calling on banks to ensure that interest rates are below 1.6% to targeted companies on Friday and promising to cut taxes to select companies. Beijing also announced to slash tariffs in half on $75 billion of U.S. imports on Thursday. Repo rates were cut and 1.2 trillion yuan was injected secure the liquidity of banking system on Monday.

Stocks in New York were dropping as of midday Friday despite the strong labor data. Employers added 225,000 jobs in January and wages rose 3.1% higher than one year ago, which may lower the possibility of an interest rate cut. 

The Dow Jones, the S&P 500 and the tech-heavy Nasdaq Composite were all down slightly as of midday Friday.