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Vipshop Holdings Limited (VIPS) stock plunged in the current market trading session: here’s why

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VIPS stock is currently being traded at $29.82 which is a 4.33% downward movement. The stock previously closed at $31.19.

What is behind the block trade?

The recent negative pattern of the stock-movement is due to the sell-off behavior of US-listed shareholding in Chinese technology companies. Traders have braced themselves for volatility in the US-equities market following the $20 billion worth of trades blocked on Friday. This has really shaken investor’s comfort in investing in the Chinese tech stock as SEC has threatened the delisting of such firms from American exchanges.

The fear and speculation for de-listing of companies started stirring around 24th March after US Securities and Exchange Commission adopted a law that was passed by former President Trump called the Holding Foreign Companies Accountable Act. The law also requires the Chinese companies to present the names of each Board member who is a member of the Chinese Communist Party.

Stock dump and initial block trade

The stock dump has come from Archegos Capital Management LLC which consists of the family office of Bill Hwang. They dumped shares of not only Chinese tech firms but also US media conglomerates. It has been reported that the initial block trades have come from Goldman Sachs as well as Morgan Stanley. However, majority of those block trades have been rebounded apart from ViacomCBSinc and Discovery Inc.

Stanley sold a large block of 45 million shares of ViacomCBS on Sunday. Similarly, Goldman Sachs sold the shares of Vipshop Holdings Ltd, ViacomCBSInc, IQiyiinc, Baidu, and Tencent Music Entertainment Group for a total worth of $10.5 billion.

Significant observation and investment behavior adopted now by investors

One main observation is being made around by analysts and portfolio fund managers that they are not sure if additional block trades will take place but the fear still looms over the market over its speculation. However, they are assuring readers and investors that none of the sell-downs are related to the fundamentals, performance, and outlook of the Chinese tech companies.

The fear and speculation of a block trade is stacking up with the traditional end-of-quarter volatility that causes sharp swings on stocks while triggering selling sentiment from other funds. However, a strategy is being implied by investors where they realize that the fundamentals of these companies are essentially the same, while this de-listing is an exaggeration that will dim down in the future. Meanwhile, that happens these Tech stocks are undervalued as their stock price keeps dropping which makes them a buying option for some long-term investors.

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