Feb 27, 2024
WuXi Is Now Most-Sold Chinese Stock by Foreigners on US Ban Fear
, Bloomberg News
(Bloomberg) -- WuXi AppTec Co. has become the most-sold Chinese stock this year on fears of US sanctions, a reversal from last year when the shares of the biotech company were coveted by overseas investors.
Foreigners have offloaded 5.45 billion yuan ($757 million) of the stock this year, compared with purchases of 7.6 billion yuan in 2023, according to data from the Northbound Stock Connect compiled by Bloomberg. Zijin Mining Group Co. and automaker BYD Co. have also witnessed outflows.
The selloff follows efforts by a group of US lawmakers in January to block some Chinese biotech companies, including WuXi AppTec and WuXi Biologics (Cayman) Inc., from accessing federal contracts. Both companies have since suffered significant declines in their shares that have erased a combined $14 billion in market value.
“Current prices are reflecting a very pessimistic scenario where both of their US revenues will be zilch from 2024, and onward,” Daiwa Capital Markets analyst Wilfred Yuen said.
Read: WuXi AppTec, WuXi Bio Slump as US Lawmakers Seek Formal Probe
A recent letter to the US Commerce Secretary and Defense Secretary from lawmakers cited concerns that the two companies may pose threats to US intellectual property and national security.
The US Senate committee that deals with homeland security has scheduled a business meeting on March 6 to potentially consider and advance the biotech bill targeting WuXi AppTec and other Chinese firms. Still, the bill’s inclusion on the agenda doesn’t guarantee discussion or action.
It’s premature to come to a conclusion about the outcome, given the lengthy legislative process involved and the likely pushback from the US pharma industry, whose interests are intertwined with Chinese contract research players, according to Daiwa’s Yuen.
Yet, the hearing and the legislation in this space highlight increasing lawmaker unease about US collaborations with China’s biotech sector and the likely risk of US data being shared with China’s military, according to Bloomberg Intelligence analyst Duane Wright.
Wright sees a 30% chance that legislation will pass in 2024, and estimates contracting restrictions in the biotech bill would affect about two-thirds of WuXi AppTec’s sales.
--With assistance from Jason Siu and Se Young Lee.
©2024 Bloomberg L.P.
