Why I sold JD.com

JC Project Freedom Why I sell JD.com
Why I sell JD.com

I started to sell 200 shares 1 day before the results came out at USD 49/share. I think on 19th May, I sold 500 shares at USD 56/share, 500 shares at USD 56.2/share, and 8 shares at USD 56.5/share. On 21st May, I continue to sell 592 shares at USD 55.7/share. On Friday 22nd, I sold the remaining 1400 shares at USD 50.2/share. I sold the shares on Friday in panic. The last 1400 shares are almost free to me, I can take a bet and just leave it in the market to continue its run. This is one of the businesses which I have held through a long psychological ride when I brace through all the drama with JD.com CEO’s alleged lawsuit. At this present, the business is doing better and even surpasses its own estimate for this quarter. Why did I sell JD.com then?

The US approved the Holding Foreign Companies Accountable Act (HFCAA), the bill was approved without objection. One of the key criteria is to certify that they are not owned or controlled by a foreign government. The financial statements need to be audit conducted by the Public Company Accounting Oversight Board. Next, it will pass to the House of Representatives before passing to President Trump for approval.

This requirement will apply to all foreign companies listed in the US. However, Chinese law forbids necessary documents from leaving the country which will prevent the audit.

This will increase the potential for Chinese companies to be delisted from the US stock exchange. Shareholders can keep the shares when a company delists and retain the rights as shareholders but the cash value can become zero. Investors hold on to the shares in a delisted company hopes the entity will list again someday in the future. A delisted company can trade over the counter exchanges (OTC).

I believe it was in 2018 when I thought the trade war between the US and China would not take place and it was a threat by President Trump only. It evolved into a full-fledge tit for tat. My Hong Kong portfolio took a severe beating as a result of a trade war. Hong Kong is a financial hub that allows China to raise liquidity but its position is compromised as China is diversifying this risk as it is moving its financial hub nearer to its capital city. Meanwhile, the US will continue to focus its attention on Hong Kong and attack where it hurts most.

Once beaten, twice shy. It is not a bottom-up approach to company valuation and stock investment. I do not wish to become a victim of the geopolitical tension. I will prefer to sell the US-listed JD.com and bring the money back to the Hong Kong market. JD.com will be listed in early June 2020. This is just one of the risks to invest in foreign markets.

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