BYD plunges after Buffett trims his stake; one fund manager says it could be a warning sign

BYD plunges after Buffett trims his stake; one fund manager says it could be a warning sign

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

The conglomerate slightly reduced its shares from 20.04% to 19.92%, according to a filing on the Hong Kong 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 starting to take cash from the market,” Yang Liu, Atlantis Investment’s chairperson and chief investment officer, told CNBC’s “Squawk Box Asia” on Wednesday.

“Maybe we’ll see more.”

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

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Earlier this week, the company reported strong numbers for the first half of 2020 with its net income for the period totaling 3.6 billion yuan ($521 million), tripling from a year earlier.

When asked about what this means for the Chinese electric vehicle market, Liu said Berkshire’s latest move could be “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.”

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, and said the current package was “not enough.”

Last week, China’s State Council announced a slew of stimulus measures worth tens of billions of dollars, as the country seeks to boost its economy which has been battered by Covid lockdowns and a real estate crisis.

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

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

“It 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 all about the confidence,” Liu added.

CNBC’s Yun Liu contributed to this report.

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