Lufax Holdings (NYSE: LU) stock price has reached a new record low amid concerns about its slow growth. The shares have dropped below the crucial support level of $1 following the release of weak financial results and a significant acquisition. As a result, the company's total market cap now stands at approximately $1.8 billion.
Lufax Holdings is one of the oldest fintech companies in China, providing a platform for individuals and businesses to easily borrow money from leading institutions in the country. While the company experienced strong growth in previous years during China's economic boom, its operations have been negatively impacted by the country's recent change in fortunes.
The most recent financial results highlight the company's struggles. Total income for Lufax came in at RMB 8,050 million or $1.1 billion, representing a 40% year-on-year decline. Net profit also plummeted from RMB 1.3 billion to RMB 131 million, marking a 90% year-on-year decrease. Other metrics, such as delinquency rates, worsened during the quarter, leading to a rise in the total Non-Performing Loan (NPL) ratio to 1.9%.
In response to its slowing growth in Mainland China, Lufax made the decision to expand its business in Hong Kong through the acquisition of Ping An OneConnect Bank, the third-largest virtual bank in the region. The company spent approximately $120 million on this acquisition.
Despite the challenges faced by Lufax, there is some optimism for Chinese companies as recent data suggests that the economy is stabilizing. The National Bureau of Statistics (NBS) reported a 4.9% expansion in Q3, and additional data released on Wednesday indicates a recovery in China's industrial production and retail sales. These positive developments could potentially lead to a rebound for struggling Chinese companies.
However, Lufax stockholders still face risks, particularly due to ongoing geopolitical tensions between the US and China. Investing in Chinese companies also carries inherent risks due to the difficulty of verifying information from these firms.
From a technical analysis perspective, the daily chart for LU stock shows a strong bearish trend in recent months, with the shares falling below the 50-day and 25-day Exponential Moving Averages (EMA). On a positive note, the stock has formed a falling wedge pattern, which is considered one of the most bullish signs in price action analysis. This pattern suggests a potential bounce-back in the stock as buyers target the key resistance point at $1.85, the highest point reached on July 28th. This price level represents an 85% increase from the current level.