Jumei Drops as China Tax Cut Stymie Online Price Advantages

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Jumei International Holding Ltd. tumbled the most on record on concern China’s tax cut on imported consumer goods will reduce the pricing advantage of the domestic online seller of beauty products.

American depositary receipts of Beijing-based Jumei sank 15 percent to $21.61 on Tuesday in New York, the biggest slump since its U.S. debut in May last year. Package-tour booking site Tuniu Corp. dropped 12 percent after a worse-than-expected first-quarter net loss. The Bloomberg China-US Equity Index slipped 1.5 percent, halting a four-day gain.

China will lower import tariffs for clothing, skincare products and diapers by more than 50 percent on average starting June 1, the finance ministry said on Monday as the government seeks to boost domestic consumption. The cut may narrow Jumei’s edge in offering discounted international cosmetic brands, according to Rosenblatt Securities Inc.

“Jumei is more concentrated on products that will be charged lower tariffs than other online stores,” Jun Zhang, who oversees China research at Rosenblatt Securities, said by phone from San Francisco.

Co-Chief Financial Officer Mona Gao said the effect would be “negligible” because the rate applies to wholesale prices, which can be much lower.

Market ‘Misconception’

“There is a lot of misconception in the market and I think a very mistaken view of the tariff cuts,” Gao said in an interview Wednesday in Hong Kong. “The tariff cut is only about 1 percent on the retail price, and there’s no guarantee that brands will pass on the savings.”

Jumei also has an advantage because as much as 90 percent of its imports have no direct competition in China, other than through gray market channels, she said.

The company, which in September started a new platform for users to buy overseas cosmetics directly from manufacturers, expanded into cross-border baby and maternity products last month, Chief Executive Officer Leo Chen said May 22 on a conference call.

Trading volume of 11.5 million shares in New York was more than five times the three-month average, according to data compiled by Bloomberg. The slump cut Jumei’s rally this year to 59 percent.

Tuniu dropped to $17.96 in the biggest retreat since November. The Nanjing-based company said its net loss more than tripled to 233.1 million yuan ($37.6 million) in the first quarter as marketing expenses jumped 158 percent. Credit Suisse Group AG downgraded the stock to neutral from the equivalent of a buy on Tuesday.

The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF advanced 2.9 percent to a record $53.60, after the Shanghai Composite Index surged the most since January 2008. The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., climbed 0.5 percent to $51.60.

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