Made in China
In a week dominated by US President Donald Trump’s will-he won’t-he trade tariffs, one of the biggest capital market deals came from a company that’s practically shut out of the American market by protectionist measures.
On the eve of an additional 10% tariff on Chinese goods taking effect, carmaker BYD managed to raise HK$43.5bn (US$5.6bn) in a primary share placement that was upsized on strong demand.
Tuesday’s share offering was the largest equity follow-on deal in the automotive sector globally for a decade and drew more than US$27bn of demand from a who’s who of investors.
Shares in BYD, which last year sold more vehicles than General Motors or Ford, had gained 36% in the Hong Kong market this year before the deal, despite continuing concerns about the trade war the US is fighting on multiple fronts.
The new US trade barriers are almost irrelevant to BYD’s business currently, though, after the Biden administration imposed a 100% tariff on Chinese electric vehicles last year. That has left it free to concentrate on the hyper-competitive Chinese car market, where it sells 90% of its vehicles.
Europe is seen as a growth market. Plans to produce vehicles in Hungary and Turkey will avoid European tariffs on Chinese EVs. There is room for BYD to grow in the Middle East too, and the United Arab Emirates’ Al-Futtaim family came in as an anchor investor in the placement amid plans for a strategic partnership.
BYD makes a large number of the components in its supply chain, making life easier compared to carmakers focused on the US market which are braced for tariffs on car parts imported from Mexico and Canada.
And despite the geopolitical backdrop, investors feel increasingly confident about certain Chinese stocks. Technology company DeepSeek’s surprise announcement of a cut-price, world-standard chatbot in late January caused international investors to reassess Chinese tech valuations. BYD was one of the companies to benefit from that, after announcing it planned to use DeepSeek technology in its cars.
Erratic protectionist policies aren’t doing much for US stocks, but they are encouraging China to develop national champions, and foreign investors are starting to see the value in betting on Chinese growth again.