Please ensure Javascript is enabled for purposes of website accessibility

Why Vipshop Stock Was Sliding Today

By Jeremy Bowman – Aug 5, 2019 at 1:45PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Rising trade tensions were a bad sign for the Chinese discount retailer.

What happened

Shares of Vipshop (VIPS -3.24%) were taking a dive today as the Chinese online discount retailer was getting swept up in the broader slide in Chinese stocks as trade tensions flared again. As of 12:44 p.m. EDT, Vipshop shares were down 9.4%.

So what

It was nothing short of a bloodbath in U.S. stocks today as the S&P 500 was down 2.6% in early afternoon, while the tech-heavy Nasdaq was off 3.2%. The Shanghai Composite was off 1.6%.

A crowded Hong Kong street

Image source: Getty Images.

Today's sell-off was prompted by a slide in the Chinese yuan, in response to U.S. President Donald Trump's threats to step up tariffs last week. The Chinese currency reached an 11-year low, at 7 yuan to the dollar, a fall that helps boost Chinese exports amid rising pressures from the trade war.

Like other U.S.-traded Chinese stocks, Vipshop shares fell sharply today; investors are worried about the impact of the trade war on the Chinese economy, as slowing growth in the world's second-biggest economy was already a concern. As a discount retailer, Vipshop has more at risk in a slowing economy or a trade war, compared to other e-commerce companies like Alibaba, which focus more on luxury or high-end goods.

Now what

This is far from the first time we've seen the trade war pound Chinese stocks. Last year, the Shanghai Composite lost 25% amid saber-rattling over trade: President Trump slapped tariffs on imports, and threatened to increase import tax rates and expand the categories of products affected, if China didn't bend to the U.S.'s will in areas like intellectual property and anticompetitive practices. The two sides hit an impasse in May when trade talks fell apart, and there's been little progress since.

Vipshop's revenue growth has nearly ground to a halt, amid rising competition in China from creative online retailers like Pinduoduo. Revenue grew just 7.3% in Vipshop's most recent quarter, continuing a long slide. Considering that the company is already struggling to grow, any impact from the trade war will only hurt.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Vipshop Holdings Stock Quote
Vipshop Holdings
VIPS
$8.65 (-3.24%) $0.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
339%
 
S&P 500 Returns
109%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.