[Click eStock] "BYD, Warren Buffett Stake Reduction Interpretation Is Premature"

[Asia Economy Reporter Hwang Yoon-joo] Hyundai Motor Securities evaluated on the 1st that it is premature to interpret Warren Buffett's recent sale of BYD shares as giving up on the Chinese electric vehicle market and BYD's growth prospects.

Jung Jin-soo, a researcher at Hyundai Motor Securities, stated, "Looking at the portfolio changes of BRK (Berkshire Hathaway), the sale of BYD was somewhat anticipated."

The Hong Kong Stock Exchange posted that Warren Buffett sold 1.33 million shares of BYD he held on August 24 at an average price of 277 HKD (Hong Kong dollars). Following this news, BYD's stock price dropped by 7.1%.

Researcher Jung analyzed, "Since the beginning of the year, the energy sector weight has been increased while the consumer discretionary sector weight has been reduced. In particular, electric vehicle companies within consumer discretionary have a conflicting relationship with the energy sector, making them the top priority for rebalancing review."

He explained, "In fact, among the consumer discretionary stocks held by BRK, GM shares, which are most similar in nature to BYD, were also sold. Rather, BRK sold more GM shares (295 million USD) than BYD (47 million USD), which had a strong incentive for profit-taking due to the sharp rise in stock price."

On the previous day, the Chinese stock market saw a sharp decline not only in BYD, which had individual issues, but also in electric vehicle competitors and eco-friendly themes and sectors such as solar and wind power, which carry heavy overvaluation burdens.

Researcher Jung emphasized, "This is recognized as a typical growth stock-value stock rotation pattern that can appear at the bottom of interest rates. Apart from supply and demand issues, the Chinese automobile sales volume, which has a high correlation with stock prices, is important."

He added, "The competitiveness (market share) confirmed under adverse conditions such as lockdowns in the first half of this year is the key to supporting the lower bound of multiples."

This content was produced with the assistance of AI translation services.