Advertisement
Stocks
BusinessCompanies

SF Express owner’s US$12 billion market loss highlights earnings risks building among China’s most popular bets

  • China’s biggest publicly traded parcel delivery company lost US$12 billion in market cap over the past week after forecasting a quarterly loss
  • The shock wipeout shows that risk in the most popular bets stems from big earnings misses as well as lofty valuations, say analysts 

Reading Time:2 minutes
Why you can trust SCMP
The turbulent sell-off of SF Holding, China’s largest publicly traded parcel delivery company, has rattled investors. Photo: Reuters.
Zhang Shidong
The turbulent sell-off of SF Holding, China’s largest publicly traded parcel delivery company, has rattled investors, sending them a clear warning about earnings risks that have been building up in the most popular stocks.
Advertisement
The Chinese courier, which operates SF Express in mainland China and Hong Kong, has had US$12 billion wiped off its market capitalisation in the past week after a company statement forecasting a quarterly loss caught traders off guard. The projected loss of as much as 1.1 billion yuan (US$168.4 million) for the three months ending March came as a surprise for the Shenzhen-based company, which was seen by investors as having a significant lead over rivals in the courier industry.

The stock’s 20-plus per cent slump over the past six days is a brutal reminder to investors that the risk in the most popular bets stems from big earnings misses as well as lofty valuations, say analysts.

00:51

Couriers in China toss customers’ parcels while sorting

Couriers in China toss customers’ parcels while sorting

“Earnings will be the key to how the market will play out throughout the earnings season in April and going forward,” said Song Yiwei, an analyst at Bohai Securities. “For the crowded-trade bets, the market had pretty high expectations for earnings. The pressure on earnings misses is building up and that will further weigh on these stocks.”

Last year, local money managers were heaping funds into the stocks of industry leaders in anticipation that their leading positions would weather the pandemic.

These crowded bets began unravelling at the start of the year, as massive relief packages and a quick roll-out of vaccines strengthened expectations of economic recovery and policy normalisation. 

01:31

Firefighters save toddler in China trapped in parcel locker by his sister

Firefighters save toddler in China trapped in parcel locker by his sister

SF attributed the predicted loss to increased investment in new business, intensified competition in the Lunar New Year period, rising labour costs and a high base the year before. Its net income increased 26 per cent to 7.32 billion yuan last year, as the outbreak of Covid-19 boosted demand for online shopping.

Advertisement