Stock Track | Kingsoft Plummets 5.18% Intraday on Hang Seng Tech Index Removal, Broker Downgrades, and Weak Earnings

Stock Track06-03

Kingsoft's stock plummeted 5.18% during intraday trading on Wednesday, driven by a combination of technical selling pressure and deteriorating fundamentals.

The decline was primarily attributed to imminent passive fund selling as the company is set to be removed from the Hang Seng Tech Index after the close on June 5, with changes effective from June 8. This index exclusion forces index-tracking funds to divest their holdings, creating significant selling pressure.

Additionally, multiple brokerages downgraded their target prices for Kingsoft. Bank of America Securities cut its target from HKD 27 to HKD 24 while maintaining a Neutral rating, and CICC lowered its target by 12.5% to HKD 28, increasing its conglomerate discount from 55% to 60% to reflect the impact of the index exclusion.

Fundamentally, the company reported weak first-quarter results with gaming revenue declining 22% year-over-year and operating profit down 34.3%. CEO Zou Tao indicated this downward trend may persist for two more quarters, while office software revenue growth of 24% was insufficient to offset the gaming weakness.

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