(Bloomberg) — Record-breaking stock sales at two of China’s biggest consumer goods companies wiped more than $18 billion off the fortunes of the country’s richest people, underscoring growing investor concerns about the health of Asia’s largest economy.
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China’s richest man, Nongfu Spring Co. founder Zhong Shanshan, lost about $4 billion as shares of the beverage giant fell as much as 12.9 percent in Hong Kong on Wednesday, according to the Bloomberg Billionaires Index, leaving him with a total net worth of $45.5 billion.
Meanwhile, Colin Huang, founder of PDD Holdings Inc., saw his fortune shrink by $14.1 billion on Monday. Shares fell the most in the company’s history after the company warned that revenue growth would inevitably slow. The decline was Huang’s biggest single-day loss ever and dropped him to fourth place in Bloomberg’s rankings after briefly holding the top spot earlier this month.
The slide continued on Tuesday, as the Temu owner’s shares fell another 4.1 percent, cutting another $1.4 billion from Huang’s wealth. Pony Ma, co-founder of Tencent Holdings Ltd., now ranks second on the Bloomberg tracker.
Their respective fortunes fall underscore fragile confidence in Chinese consumption over the long term, as many of the world’s biggest companies face falling demand amid a weakening economy. The battle for increasingly frugal shoppers has prompted foreign and domestic companies to engage in a price war to grab as much of the shrinking pie as possible – including a new purified water product from Nongfu for under one yuan ($0.14).
“China’s economy is probably worse off than people think if consumer goods companies like Nongfu and PDD are not doing well,” says Vey-Sern Ling, managing director at Union Bancaire Privee. “They represent segments where demand should be stable – beverages and low-cost products.”
Both companies have also faced a number of public relations challenges this year. Nongfu was bombarded with criticism on Chinese social media following the death of Zong Qinghou – the founder of main rival Hangzhou Wahaha Group Co. – with some users recapping what they believed was Nongfu’s attempts at trickery to gain an advantage over its rival. Months later, a report by the Consumer Council of Hong Kong questioned the quality of Nongfu’s water, but later clarified the statement.
PDD faced a backlash last month when hundreds of traders staged a rally outside its southern China offices to protest what they said were increasingly unfair penalties. E-commerce giant Temu is also coming under increasing scrutiny from regulators. The European Union is working on a proposal to close an import tax loophole for cheap goods bought online, which would impact Chinese retailers.
Nongfu’s sales of packaged drinking water products fell 18 percent in the first half of the year, with the segment’s share of total sales falling to around 39 percent from around 48 percent last year. The decline was attributed to negative public opinion toward the company and Zhong since late February.
Nongfu and PDD “have competitors aggressively eyeing their market share,” said Li Xuetong, fund manager at Shenzhen Enjoy Investment Management Co. “One thing is certain: The two companies, which investors have valued as market leaders in their respective fields, are not immune to the cutthroat competition seen in other industries – and investors appear to be rethinking how secure their position is.”
– With support from Lulu Shen.
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