Hong Kong

Shares in fast-fashion giant Shein fell as much as 10% on their trading debut on Hong Kong’s stock market on Tuesday, before recovering some of their losses, following years of delay to the company’s plans to list publicly and regulatory setbacks in Europe and in the US.

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Shein’s initial public offering opened on 24 August, with the final share price set a week later on 31 August. Trading began the following day, on Tuesday.

The gap reflects standard IPO process, as investors placed their orders over about a week, the banks running the deal then fixed the final price and decided who got shares, and trading opened a few business days later once the exchange gave the final go-ahead.

The listing marks the end of a long search for a stock market willing to take Shein after plans to list in New York and London stalled amid scrutiny over its Chinese supply chains, forcing the company to turn to Hong Kong instead.

New US and EU tariffs on low-cost parcels from China, along with rising shipping costs from the war in Iran, have contributed to Shein’s swing from a $395 million (€340mn) profit to a $99 million (€85mn) loss in the first quarter of this year.

Shein raised about $1.7 billion (€1.46bn), pricing shares at HK$48.56 (€5.33) each, in one of the city’s biggest share sales this year.

“Shein’s Hong Kong listing marks a new starting point,” said Leigh Gui, Shein’s chief financial officer, in a short speech at its listing ceremony.

But in early trading, the shares fell to below HK$44 (€4.83) before losses narrowed.

Tariffs squeeze profits

Shein has built its appeal to customers on ultra-fast, affordable fashion, delivered from China to the West within days.

However, the end of “de minimis” tariff exemptions in the US and the European Union has raised duties on low-value parcels from China, including Shein’s products. Higher logistics costs, driven partly by the war in Iran, have also squeezed the company’s low-price business model and profitability.

Tariff costs have forced Shein to raise prices, “cutting into its main advantage,” said Jacob Cooke, CEO of WPIC Marketing + Technologies.

Back to its roots

Shein, pronounced “she-in,” earlier explored listing its shares in New York and London, and moved its headquarters from China to Singapore in 2021.

But increasingly strict scrutiny by Beijing and by regulators in the US and Europe led it to embrace its Chinese roots and switch to a Hong Kong listing.

Launched in 2012 in China, much of Shein’s operations were in the southern province of Guangdong before it moved its corporate headquarters out of the country.

“Guangdong is Shein’s roots, and the starting point of our journey,” founder Sky Xu said in a speech in February.

Pivoting its focus back to China also highlighted the advantages Shein derives from a supply chain system that “only exists” in Guangdong, said William Ma of GROW Investment Group, referring to its small-batch, fast-response manufacturing model.

Shein has hit other roadblocks in expanding in Europe. In February, the EU launched a probe into the company with a focus on “illegal” products, including alleged child sexual abuse material.

In May, Shein acquired San Francisco-based eco-friendly clothing retailer Everlane, a move some analysts said was not the best fit.

Hong Kong’s IPO boost

The company’s market value was roughly $27 billion (€23.2bn) as it listed in Hong Kong, a fraction of its peak valuation a few years ago.

“Shein has probably missed its golden listing window due to the shift of momentum toward AI and tariffs, which can affect valuations and profitability,” said Gary Ng, a senior economist for Asia Pacific at French bank Natixis.

Still, Shein’s listing is welcome news for Hong Kong, as the Chinese territory makes increasing efforts to hold onto its role as a global financial hub following a downturn in 2023.

Hong Kong’s stock exchange has had a strong year for IPOs, raising more than $40 billion (€34.4bn) so far.

There is also a backlog of companies seeking to list there, said Lorraine Tan at investment research firm Morningstar.

Activist group says the ‘twisted’ Hong Kong judicial system had long ago decided that the pair were guilty.

A Hong Kong court has found two pro-democracy activists guilty on national security charges in a trial widely viewed as exemplifying the erosion of freedom of expression in the Chinese city.

Lee Cheuk-yan, 69, and Chow Hang-tung, 41, former leaders of the Hong Kong Alliance in Support of Patriotic Democratic Movements of China, were found guilty of “incitement to subversion” for their role in organising candlelit vigils to mark Beijing’s deadly 1989 Tiananmen crackdown, in a Hong Kong court on Friday. The two had pleaded not guilty and were charged in 2021.

The pair could face up to 10 years in jail. Sentencing is expected at a later date.

Prosecutors argued that the pair “endanger[ed] national security in the name of human rights”.

Chow, a human rights barrister who represented herself, told the court in May that the law itself was on trial.

Friday’s verdict was “no surprise”, said Mark Clifford, president of the Committee for Freedom in Hong Kong Foundation.

Hong Kong’s “twisted” judicial system had already decided the pair were guilty in 2021, he said. He described Lee and Chow as “true Chinese patriots” who were silenced because they “spoke truth to power” and “held up a mirror to the Chinese Communist Party”.

Hong Kong’s crackdown

For three decades, the candlelight vigil organised by the alliance was the only large-scale public commemoration of the Tiananmen crackdown, drawing tens of thousands of people annually to mourn the victims in China. The event was banned in 2020 during the first year of the COVID-19 pandemic, weeks before Beijing imposed the security law on Hong Kong to quell the 2019 massive antigovernment protests.

The alliance’s leaders have been behind bars since they were charged.

Chow and Lee “exposed the Chinese government’s fears of the memory of its own atrocities”, Elaine Pearson, Asia director at Human Rights Watch, said, urging governments around the world to hold Beijing to account for erasing Hong Kong’s freedoms.

Earlier this year, Jimmy Lai, 78, a media mogul and high-profile rights campaigner in Hong Kong, was found guilty on national security charges and sentenced to 20 years behind bars.

Led ‘like a dog on a lead’

In a personal blog published in the days leading up to the verdict, Chow detailed her treatment by correctional services, in which she described being led “like a dog on a lead”, shackled at the wrists, waist and ankles.

She described a new method of restraint, with specialised handcuffs, as the source of significant pain during her long detention: “One can only ‘choose’ which part of the body shall suffer in turn” due to the bodily contortions forced by the restraints she has been held in.

Chow is one of the few high-profile political prisoners detained in Hong Kong to continue to speak out publicly against the authorities.

In June 1989, China’s government sent tanks and soldiers to crush a pro-democracy movement that had installed itself in Beijing’s central Tiananmen Square. Hundreds, possibly thousands, of people were killed by soldiers, and many were injured. Beijing has since sought to censor mention of the incident in China.