Chinese electric car maker BYD shares fall after Warren Buffett cuts stake

Hong Kong-listed shares of BYD fell on Wednesday after Warren Buffett’s Berkshire Hathaway cut its stake in the Chinese electric car maker – and a fund manager said this could be a warning sign of more to come.

The conglomerate reduced its stake slightly from 20.04% to 19.92%, according to a filing on the Hong Kong stock exchange. Berkshire sold 1.33 million shares of BYD for about $47 million — the conglomerate now owns 218.7 million shares, the filing showed.

“This is a common trend for investors to start pulling money out of the market,”[ads1]; Yang Liu, Atlantis Investments’ chairman and chief investment officer, told CNBC’s “Squawk Box Asia” on Wednesday.

– Maybe we’ll see more.

BYD shares plunged more than 12% in Wednesday’s session in Hong Kong, and were the worst performers on the Hang Seng Index, according to Refinitiv data. The stock has jumped more than 600% in the past 10 years.

Earlier this week, the company reported strong figures for the first half of 2020 with net income for the period totaling 3.6 billion yuan ($521 million), a threefold increase from the previous year.

Asked what this means for the Chinese EV market, Liu said Berkshire’s latest move could be “warning signs that the market may be [coming] to a great correction.”

“There is too much uncertainty, and I think so [Buffett] got a little nervous,” she said. “Perhaps this recession ahead for the US economy and also weaker Chinese consumption overall is bringing investor confidence to a larger scale.”

Room for more China stimulus

Looking ahead to China’s upcoming National People’s Congress in October, Liu said China has room for more government stimulus measures, saying the current package was not enough.

Last week, China’s Cabinet announced a series of stimulus measures worth tens of billions of dollars, as the country tries to boost an economy that has been hit by Covid-19 lockdowns and a property crisis.

“There is room for the government to help the economy and boost confidence,” the fund manager said.

She said people will be looking for clues about the government’s outlook for growth “to see what happens.”

“That will give us a big indication [on] where China’s economy will go,” including the direction of the government’s zero-Covid policy and what measures will be taken to tackle low consumption, she said.

“The economy needs confidence to believe, it’s now about confidence,” Liu added.

CNBC’s Yun Liu contributed to this report.

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