Why PDD Holdings, LVMH, and GDS Holdings Sank Today

Market Performance - Chinese stocks and China-related stocks experienced a significant sell-off, with PDD Holdings down 6.2%, GDS Holdings down 6.8%, and LVMH down 3.1% as of 1:15 p.m. ET [1] - The sell-off followed a strong rally over the past month, with PDD Holdings up 55%, GDS Holdings up 21%, and LVMH up 5.6% [2] Company-Specific Factors - PDD Holdings is a major e-commerce platform in China with market-leading growth, benefiting from a stronger Chinese consumer and economy [2] - GDS Holdings, a leading data center operator, would benefit from lower interest rates due to its capital-intensive business model [2] - LVMH has significant exposure to China, with 30% of its sales coming from East Asia, primarily China, and its wines and spirits segment generated 2.8 billion euros in sales in the first half of 2024 [2][4] Economic and Policy Factors - The sell-off was triggered by the lack of specific economic stimulus measures from China's National Development and Reform Commission, despite promises of fiscal stimulus and interest rate cuts last month [3] - Chinese authorities imposed tariffs on European brandy imports, ranging from 30.6% to 39%, in retaliation for EU tariffs on Chinese-made electric vehicles, potentially harming LVMH's sales to China [4] Market Sentiment and Outlook - Chinese stocks and China-exposed stocks trade at low valuations due to years of recessionary conditions, including zero-COVID lockdowns, tech regulations, and a property bubble [5] - The lack of clarity on stimulus measures and the return of tit-for-tat tariffs have reminded investors of ongoing risks, leading to hesitation in the market [6]