(Bloomberg) — Record-breaking stock selloffs in two of China’s biggest consumer firms erased greater than $16 billion from the fortunes of the nation’s richest people, underscoring deepening investor concern over the health of Asia’s biggest economy.
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China’s wealthiest person, Nongfu Spring Co. founder Zhong Shanshan, lost some $3 billion because the beverage giant’s shares fell by a record 10% Wednesday in Hong Kong, in response to the Bloomberg Billionaires Index, leaving him with a complete of $46.6 billion.
Meanwhile, PDD Holdings Inc. founder Colin Huang’s wealth tumbled by $14.1 billion on Monday, as shares fell essentially the most in company history after it warned revenue growth would inevitably dwindle. The retreat was Huang’s biggest one-day loss ever, dropping him to fourth on Bloomberg’s rating after briefly holding the highest spot earlier this month.
The slide continued Tuesday, when the Temu owner’s shares dropped an extra 4.1%, knocking one other $1.4 billion from Huang’s riches. Tencent Holdings Ltd. co-founder Pony Ma now holds the second spot on Bloomberg’s tracker.
Their respective wealth plunges underscore shaky longer-term confidence in Chinese consumption, where most of the world’s biggest businesses are facing a slowdown in demand. The battle for increasingly frugal shoppers has fueled steep price cuts, leading to margin-obliterating products like a recent purified water sold by Nongfu for under 1 yuan ($0.14) each.
“China’s economy might be worse than people think if consumer firms like Nongfu and PDD will not be doing well,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “They represent segments where demand is purported to be resilient — drinks and value-for-money products.”
Each firms have also battled a series of public relations challenges this 12 months. Nongfu was criticized on Chinese social media after the death of Zong Qinghou — founding father of key rival Hangzhou Wahaha Group Co. — with some users alleging that Nongfu schemed to get a bonus over its competitor. Months later, a report from Hong Kong’s Consumer Council questioned the standard of Nongfu’s water, which it later clarified.
PDD faced backlash last month as a whole lot of merchants staged a rally outside its southern China offices, protesting what they called unfair penalties increasingly being levied by the corporate. And there’s growing regulatory scrutiny of its e-commerce giant Temu, with the European Union working on a proposal to shut an import tax loophole for affordable goods bought online.
Nongfu’s revenue from its packaged drinking water products fell by 18% over the primary half, with the segment’s proportion of total revenue dropping to about 39%, from around 48% last 12 months. The decline was attributed to negative public opinion toward the corporate and Zhong for the reason that end of February.
Nongfu and PDD “have competitors eyeing their market share aggressively,” said Li Xuetong, fund manager at Shenzhen Enjoy Investment Management Co.
“One thing for certain is that the 2 firms, which investors were joyful to value because the leaders of their respective fields, will not be being spared from breakneck competition as seen in other industries — and investors appear to be rethinking how secure their perch is,” Li said.
–With assistance from Lulu Shen and Pui Gwen Yeung.
(Updates figures in lead and second graph)
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