Shein shares fall after stock market debut in Hong Kong

Dan Coatsworth, head of markets at AJ Bell, said: “Shein has got off to a poor start as a listed company. The drop in its share price on the first day of trading is the latest in a string of setbacks. Shein had already failed to list its shares in the US and the UK, and now Hong Kong has not proved to be a vibrant home for its stock.

“The retailer joined the stock market with a valuation one quarter of its peak recorded in the post-pandemic e-commerce boom. The valuation obviously wasn’t cut-price enough, which might not surprise given how Shein attracts the type of person who always wants to pay less.

“Shein’s IPO has arguably come too late to capitalise on its global retail disruption story. In recent years, the company has faced massive headwinds from changes to tariffs and taxes on small items, to heightened competition and rising costs.

“Environmental, social and governance issues continue to haunt the company as consumers, politicians, regulators and investors worry about whether Shein has unethical business practices.

“People have got tired of the idea of buying a dress and throwing it away after one use. Increasingly, there is an appetite to buy items that last longer and the cheapest way is to shop for pre-loved items. Vinted has become the platform of choice for cheap clothes as it is a way to snag a bargain and get good quality items at a fraction of their original price. Shein’s clothes are also cheap but the quality of items is open to question.

“Shein has floated on the stock market at a time when consumers are not feeling flush. There is considerable uncertainty around the impact of higher oil prices on inflation and what that could mean for interest rates, meaning consumers are watching every penny.

“One might assume that discount retailers benefit when people are scaling back their spending as individuals trade down to cheaper items. That has not proved to be the case, hence why the likes of Primark are finding life much harder. Even previous fast fashion darlings ASOS and Boohoo have been knocked sideways by changing consumer habits and industry developments.

“Investors look for companies with big opportunities to grow money. With Shein, the list of negatives appear to far outweighs the positives, hence why it could struggle to attract significant investor interest in the near-term.

“Shein’s shares could be volatile until the business can prove that its supply chain is squeaky clean and there is much greater transparency in everything it does.”