China’s most bullish stock bet risks falling apart as world’s biggest Li-ion battery maker CATL makes a surprising U-turn in its two-year run
- Shares of Contemporary Amperex Technology (CATL) have reversed their sevenfold surge in the past two years to retract 18 per cent from their December 2 record
- The retracement was double the loss on Shenzhen’s ChiNext for growth companies, in which CATL is the biggest component with an 18 per cent weighting
China’s hottest stock trade is showing signs of falling apart.
The pullback in CATL’s stock also unleashed a bout of sell-offs in green energy-linked stocks such as Ganfeng Lithium and solar panel maker LONGi Green Energy Technology. The tumult risks killing the sole bullish sector in China’s broader stock market, which has been languishing under regulatory clampdown, US-China tension and debt crisis.
“The key problem is that CATL’s stock is too expensive,” said Wang Chen, a partner at Xufunds Investment in Shanghai. “It’s true that the new-energy industry grows faster than any other industry, but history [shows that] no company with a trillion yuan in market capitalisation can retain the valuation above 100 times [earnings].”
CATL shares slipped less than 0.1 per cent to 565 yuan at the close on Thursday. The current stock price valued CATL at 1.34 trillion yuan (US$211 billion), making it the fourth-largest company in the onshore market, according to Bloomberg’s data. It trades at 131 times earnings, the data showed.