Internet investment firm Prosus NV has completely divested its stake in online travel agency Trip.com through a block trade worth $743 million, according to Bloomberg News. Additionally, Chinese search engine Baidu Inc. sold $534 million of the company’s American depositary shares. Last week, entities associated with DCM Ventures also liquidated their entire stake in Kuaishou Technology for $477 million, while a group of pre-IPO investors in Sichuan Kelun-Biotech Biopharmaceutical Co. raised $49 million.
“The market has demonstrated its capacity to handle large deals,” remarked Edward Byun, co-head of equity capital markets for Asia (excluding Japan) at Goldman Sachs Group Inc.
These share sales occur amid the Chinese government implementing new measures to bolster the economy. Reports suggest the country is considering injecting up to 1 trillion yuan ($142 billion) into its largest state banks to enhance their ability to support the struggling economy. This week, the central bank’s governor announced a cut to a key short-term interest rate and plans to lower the reserve requirements for banks to their lowest level since at least 2018.
The benchmark CSI 300 index of mainland Chinese stocks marked its seventh consecutive day of gains on Thursday, while Hong Kong’s Hang Seng Index has increased approximately 17% this year.
“Given its relatively high valuation compared to other Chinese ADRs, profit-taking at this stage is understandable,” said Billy Qi, an analyst at 86Research, referring to the recent divestments in Trip.com shares. “This is unlikely to create prolonged pressure on the stock.”
Secondary share sales in Chinese companies have amassed $6.4 billion this year, as per Bloomberg’s compiled data, surpassing the $2 billion raised in 2022 and the $3.5 billion in 2023.
These recent transactions follow Walmart Inc.’s decision to end its eight-year partnership with Chinese e-commerce giant JD.com Inc., selling its entire stake for $3.6 billion.
In the second quarter of this year, foreign investors withdrew a record amount of capital from China, likely indicative of deepening pessimism regarding the world’s second-largest economy. The economic slowdown and rising geopolitical tensions have prompted some companies to scale back their exposure.