Why Uxin Shares Plunged Again Today

FAN Editor

What happened

Shares of Uxin (NASDAQ: UXIN), the Chinese online used-car platform, have been on a roller-coaster ride over the last month. The stock surged at the beginning of December on news of a partnership with Alibaba’s (NYSE: BABA) Taobao marketplace, more than tripling from $2.80 to nearly $10 a share. However, the stock has given up much of that gain over the last week on concerns about the weakening Chinese economy and broader volatility in the market.

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That trend continued today, as Uxin shares were down 19.6% as of 12:04 p.m. EST.

So what

There wasn’t any company-specific news out on Uxin today, but the stock seemed to fall in tandem with the broader Chinese market after the Shanghai Composite closed down 1.2% and the Hong Kong-based Hang Seng lost 2.8% today. Signs showed that economic growth continued to slow as a key purchase managers index, which measures manufacturing activity, fell from 50.2 in November to 49.7 in December. Any number below 50 represents a contraction rather than an expansion, and it’s the second data point this week to show China’s manufacturing sector contracting.

Now what

The CSI 300, China’s benchmark stock index, was the worst-performing one in the world out of the major indexes last year, falling 27%, and 2019 could be in for another rough year if the economy continues to slow down.

As a fast-growing, profitless company dealing with a cyclical industry, Uxin is particularly vulnerable to a weakening consumer economy. Following its June IPO, investors are still trying to make sense of the company’s potential. Volatility seems likely to remain considering the Chinese economic situation and the inherent risk in Uxin’s position, as the e-commerce company is still spending aggressively to grow its top line and take market share in this emerging industry.

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Jeremy Bowman owns shares of Uxin Ltd. The Motley Fool recommends Uxin Ltd. The Motley Fool has a disclosure policy.

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