Key Takeaways:
- BRILLIANCE CHI plunged 18.25% to HKD2.06, a more than one-year low
- Morgan Stanley warned BMW's earnings guidance cut pressures the stock
- Special dividend potential appears limited after prior cash distributions
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Brilliance Chi plunges 18% as Morgan Stanley flags BMW China risks
BRILLIANCE CHI (01114.HK) plunged 18.25% to HKD2.06 on June 18, its lowest in more than a year, after Morgan Stanley warned that BMW's earnings guidance cut is pressuring the stock.
"The sharp decline reflects that capital markets are gradually pricing in expectations of further earnings pressure on BMW's sales in the China market," Morgan Stanley said in a research report.
The stock touched a low of HKD2.03 during the session, with turnover reaching 147 million shares valued at HKD314 million. Short selling accounted for 15.08% of trading volume, or HKD28.76 million, indicating bearish positioning.
After substantial cash distributions and a strong share price rally over the past few years, the remaining potential for special dividends now appears limited, Morgan Stanley said. The stock's valuation is becoming more closely tied to BMW's sales performance in China, where the German automaker recently forecast an operating margin as low as 1%.
The decline marks a more than one-year trough for BRILLIANCE CHI, which had benefited from hefty special dividends in prior years. BMW's warning on June 17 sent its own shares tumbling and raised questions about the profitability of its China joint venture with BRILLIANCE CHI.
BMW forecast an operating margin as low as 1%, according to a separate report, as the demand slowdown in China — the world's largest auto market — pressures profitability. The German automaker plans to cut more costs after the China slump hit its outlook.
The decline puts BRILLIANCE CHI at its lowest since early 2025, testing support below the HKD2.00 level. Investors will watch for any further guidance from BMW on its China operations and whether additional analysts revise their ratings on BRILLIANCE CHI.
This article is for informational purposes only and does not constitute investment advice.
