What happened
Shares of Baozun (BZUN 6.59%) headed lower for the second day in a row as investors continued to sell the stock on fears that Chinese stocks would be delisted from U.S. stock exchanges.
Baozun was down 9.3% as of 3:17 p.m. EDT.
Image source: Getty Images.
So what
The latest salvo in the feud between the U.S. and China, which has taken on a new dimension due to the coronavirus pandemic, is the Senate's passage on Wednesday of a bill that threatens to delist Chinese stocks from U.S. exchanges. Should it become law, the Holding Foreign Companies Accountable Act (HFCAA) would tighten the rules for international companies that want to list their stocks on U.S. exchanges.
The bill is seen as political retribution against China for the coronavirus, and was also drafted in response to the fraud uncovered at Luckin Coffee and similar allegations at other Chinese companies.
Baozun helps multinational companies like Nike, Starbucks, and Microsoft with their e-commerce operations in China, handling things like IT, warehousing, and marketing. Since the company depends more on business from American companies than most of its Chinese peers, it may be more vulnerable to the impacts of any delisting law or if U.S. markets further stigmatize Chinese companies.
Now what
Baozun is set to report first-quarter earnings on June 2. In a letter to shareholders in April, CEO Vincent Qiu acknowledged that the COVID-19 pandemic had presented some challenges to the company, but also said that it's leading more businesses to recognize the value of e-commerce and the need to develop a greater online profile, which could drive Baozun's growth.
After their recent slide, Baozun shares are trading near a three-year low despite the fact the company has been putting up solid growth. If it delivers better-than-expected results in its earnings report, the stock could start to bounce back, as other Chinese e-commerce stocks like Alibaba and JD.com are trading near recent highs.
Because of the impact of the pandemic, analysts forecast that Baozun's revenue growth will slow to 9.4% and that earnings per share will fall from $0.13 to $0.02.
