Massive Volume "Panic Selling" Cuts Warren Buffett's Chinese Car Maker BYD In Half Overnight

For the second time in 2 days, a Chinese car maker's stock has been utterly devastated overnight - on absolutely no news. Shares in BYD - the Chinese electric car maker part-owned by Warren Buffett - crashed 47% in a bout of total panic selling (before recovering modestly), just a day after Geely - another car maker - crashed 22% on an earnings warning. The reason - perhaps unsurprising - given by some is worries over Mainland China IPOs "caused a liquidity squeeze," as the recent rally in mainland shares is led by leverage financing leading to major margin-calls on modest drops. Is it any wonder the PBOC is trying to tamp down the speculation.

 

 

As The FT reports,

Shares in BYD, the Chinese electric car company part-owned by Warren Buffett, fell as much as 47 per cent during a bout of panic selling.

 

BYD’s Hong Kong-traded shares rebounded partially in late trading to close down 29 per cent, at HK$25.05, on Thursday. Trading volumes were very heavy, at 40 times the previous day’s 15-day moving average, according to Bloomberg data.

 

In a statement issued after the market closed, the company’s board said it was not aware of any reason for the sharp sell-off.

 

BYD is the second Chinese car company to be punished by investors in as many days. On Wednesday shares in Geely, whose parent also owns Volvo Cars of Sweden, fell as much as 22 per cent after it flagged a possible 50 per cent year-on-year decline in net income for 2014.

And Bloomberg adds,

“The mainland IPOs have caused a liquidity squeeze,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai.

 

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BYD tumbled 29 percent in Hong Kong, the biggest loss on record since its listing in 2002. The shares slid 10 percent in Shenzhen. Investors are speculating on BYD’s outlook after Geely Automobile Holdings forecast a plunge in profits on the slumping ruble, said Mari Oshidari, a Hong Kong-based strategist at Okasan Securities Group Inc.

 

“There are a lot of rumors flying around in the market but there’s nothing concrete at the moment,” she said. “It’s hard to pinpoint what’s causing the sharp decline in the afternoon.”

 

The company’s “production and operations are operating as usual, this is market behavior, and the company is closely monitoring this,” Edward Zhou, a spokesman for the Shenzhen, China-based company, wrote in an e-mail seeking comment on today’s share-price decline.

 

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The recent rally in mainland shares is led by leverage financing, potentially triggering regulatory scrutiny, Judy Zhang, an analyst at BNP, wrote in a research note. The Shanghai Composite may drop to 2,600 if the market deleverages by 1 trillion yuan, according to the report.

 

Investors bought 105.7 billion yuan of shares using margin debt on the Shanghai exchange yesterday, taking the outstanding value of stock purchases through borrowed money to 648.4 billion yuan, according to data from the bourse.

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This is what happens Larry...