US-listed Chinese shares: Why did Alibaba, JD.com and Pinduoduo shares crash?

US-listed Chinese shares crash: What Happened?

Shares of US-listed Chinese e-commerce companies including Alibaba, JD.com and PDD Holdings all crashed between 2.5% and 8% in the premarket on Tuesday, February 21 as investors fret over rising risks related to an outright price war between the online retailers in China.

JD.com led the plunge and is expected to open at its lowest in four months after the company planned to offer subsidies, ratcheting up a price war with its e-commerce peers.

The Hang Seng Tech Index, China’s benchmark stock index for technology shares, fell as much as 2.9% Tuesday, on track for its lowest close this year. JD.com plunged as much as 8.4% in China, after reports of its  $1.5 billion subsidy campaign sparked undue competition fears among investors.

JD.com share price: Performance

 JD.com subsidy: How will it impact share prices?

The assertive move raises the possibility that the world's largest internet market is about to enter a phase of intense competition that could reduce profitability.  

JD.com’s $1.5 billion subsidy is meant to compete directly with its competitor PDD Holdings, whose budget shopping app Pinduoduo has been on a meteoric rise.  

Generally, shopping subsidies, discounts etc from even one player in the market forces most other players to cut down prices to stay relevant.  

JD.com share price: Analyst View

• 36 out of 40 analysts rating the stock have a ‘buy’ call with a share price target of $81.
• Brokerage Baptista Research has a ‘hold’ rating and a share price target of $64. 
• Brokerage 86 Research has a ‘buy’ rating on the stock with a price target of $65. 

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.