Bulls Flee Buffett's China Investment as Shares Lose $9 Billion

(Bloomberg) -- The rout in BYD Co. shares is nearing $9 billion as investors desert what was the world's top stock only months ago.

The Chinese maker of electric vehicles, which counts Warren Buffett's Berkshire Hathaway Inc. as its biggest investor in Hong Kong, lost another 2.1 percent on Wednesday after two brokerages that had been bullish on BYD cut their rating to the equivalent of neutral. That followed at least another downgrade last week, according to data compiled by Bloomberg. Its recommendation consensus -- a gauge of analyst confidence in a stock on a scale of 1 to 5 -- stands at 3.7, the lowest in almost three years.

Investors and analysts alike are losing faith in BYD's ability to thrive with fewer government subsidies and growing competition, with the company last week predicting first-half profit may tumble as much as 83 percent. It's among the year's worst performing Chinese companies in Hong Kong, and has given back almost all of the gains triggered by last year's euphoria over China's plan to get rid of fossil-fueled cars.

Buffett's investment in BYD has been quite profitable since a unit of Berkshire Hathaway first bought 225 million shares in September 2008, paying a discounted HK$8 apiece. The billionaire, known for his long-term investing style, held on to the stake even as prices soared to HK$80.45 last October. He once told a Chinese state broadcaster that he “loved” the shares.

BYD has a habit of whipsawing investors. The Hong Kong shares have been either oversold or overbought -- and often both -- every year since its 2002 initial public offering in the city. The company's mainland-listed shares tumbled 7 percent on Wednesday, the steepest loss among China's 50 largest firms, as onshore equity traders caught up following a two-day holiday.

To contact the reporter on this story: Sofia Horta e Costa in Hong Kong at shortaecosta@bloomberg.net.

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Philip Glamann, Ron Harui

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