By Clarence Leong
Shares BYD Co. fell sharply Wednesday, after Warren Buffett’s Berkshire Hathaway Inc. moved to cut its stake in the Chinese electric-car maker, raising worries about further stake sales.
BYD’s Hong Kong-listed stock fell as much as 13% and was trading 9.5% lower at 238.00 Hong Kong dollars (US$30.32) at midday, hitting its lowest level since mid-May.
The city’s benchmark Hang Seng Index was recently 0.4% lower.
Berkshire Hathaway sold 1.33 million of BYD’s H-shares last Wednesday at an average of HK$277.10 a share, according to a filing to the Hong Kong stock exchange. The sale reduced the investment company’s holdings in the auto maker to 218.7 million shares from 220 million shares, according to the filing.
There may be near-term pressure on BYD’s stock because “we don’t know how much they’ll be selling,” Daiwa Capital Markets analyst Kelvin Lau said, referring to Berkshire Hathaway. “They are very, very long-term investors…once they sell, they might exit.”
The correction today doesn’t appear overdone because “if you reference what Buffett did with PetroChina, the timing was very good,” Mr. Lau said. Berkshire Hathaway offloaded its entire stake in PetroChina Co. in late 2007, when the company’s share price was at its “peak period,” he noted.
“Some investors might take this as indication that this would be the peak of BYD share price, coupled with high valuation,” Morningstar equity analyst Vincent Sun said in an email. But Morningstar keeps its fair-value estimate of HK$315 on the stock, saying its fundamentals haven’t changed.
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