The escalation of trade war tensions between China and the United States negatively impacted JD.com (NASDAQ: JD) stock price upside momentum.
The United States plans to impose new restrictions on China. This time they are seeking to hurt Chinese access to international financial and capital markets.
JD.com stock price dropped from 52-weeks high of $30 to $27 following the news. The market pundits are expecting further stock price selloff in the coming days. This is because the new plan from White House includes de-listing of Chinese stocks from U.S. stock markets.
The actual plan behind these actions is limiting the U.S. investors’ portfolio flows into China.
The U.S. stock market responded negatively to these reports. Indeed, Chinese tech stocks have lost high mid-single-digit value following the news.
“If the White House was to go through with the plan to restrict U.S. – China capital flows, “it would be an unmitigated disaster,” said Stephen Roach, former chairman of Morgan Stanley Asia.
“Open access to each other’s markets is really important, especially with China likely to be the biggest consumer market in the world in the first half of this century,” Roach said.
Some market analysts are seeing this move as a pressure tactic to get a win-win deal on the negotiation table.
JD.com is among the fastest-growing Chinese tech companies. It has generated a 23% Y/Y revenue growth in the second quarter. The company’s earnings per share of $0.33 in Q2 topped the consensus estimate for $0.25 per share.
The company is expecting to generate Q3 revenue growth in the range of 20-24% from the previous year period. The company appears in a strong cash position to support its aggressive growth plans
JD.com stock price rallied close to 35% this year. The stock price upside momentum now depends on trade relations between the two largest economies. Therefore, keeping a close eye on trade war negotiations could help in making wise investment decisions.