Surveillance Equipment Maker Was One of Most-Loved Chinese Stocks by Foreign Investors

(Bloomberg) -- One of the most popular Chinese stocks for foreign investors has found itself in the Trump administration’s crosshairs.

Hangzhou Hikvision Digital Technology Co. dropped to its lowest since Jan. 4 as the U.S. considers curbs on component buying for as many as five Chinese companies, including the surveillance equipment maker and Zhejiang Dahua Technology Co., according to people familiar with the matter. A blacklisting would heighten a dispute with China that has also brought Huawei Technologies Co. into the line of fire, though sanctions against that company are on hold.

Overseas investors hold 8.63% of Hikvision via a trading link with Hong Kong, the 11th highest among Shenzhen-listed stocks, according to exchange figures as of Tuesday. Holdings reached a peak of nearly 12% last May, two months after the stock hit a record high. Hikvision has boomed as China cast a wider surveillance net over its citizens, giving the company a strong foothold in a global market worth $32 billion in 2017, according to BIS Research.

Hikvision’s shares fell as low as 24.84 yuan Wednesday, slumping by the 10% daily limit in Shenzhen before paring the loss when the 21st Century Business Herald cited a company official as saying a U.S. ban wouldn’t impact its business. Hikvision closed down 5.5%, with turnover on the stock more than triple the average in the past year. Dahua fell 5.9%.

Hikvision has tumbled nearly 30% from an April 1 high, with offshore investors selling around 3 billion yuan of the shares via the Shenzhen link from then through last week. Foreigners have been selling Chinese stocks as a whole: they’ve offloaded 47 billion yuan ($6.8 billion) of mainland-listed equities via exchange links this month, already more than double the total for April, which itself was a monthly record.

(Updates moves.)

--With assistance from Jim Ip.

To contact Bloomberg News staff for this story: April Ma in Beijing at ama112@bloomberg.net;Amanda Wang in Shanghai at twang234@bloomberg.net

To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, Will Davies, David Watkins

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