Finance
JD.com leads losses in Hong Kong, falling 10% after Walmart confirms stake sale
Signage at JD.com’s warehouse in Shanghai, China, on Mar. 9, 2022. The U.S. Securities and Exchange Commission on Wednesday added over 80 firms to its list of entities facing possible expulsion from American exchanges, which include China’s JD.com, Pinduoduo, Bilibili, and NetEase.
Qilai Shen | Bloomberg | Getty Images
Shares of Chinese e-commerce giant JD.com plunged 10% on Wednesday in Hong Kong after U.S. retailer Walmart confirmed it will sell its stake in the Chinese firm.
Walmart told CNBC the decision to sell its stake will allow the company to “focus on our strong China operations for Walmart China and Sam’s Club, and deploy capital towards other priorities.”
The company said “JD has been a valued partner to us over the past 8 years, and we are committed to a continued commercial relationship with them.”
The stock was the largest loser on Hong Kong’s Hang Seng index. The U.S.-listed shares fell 9.5% in after-hours trading.
Walmart entered into a strategic alliance with the Chinese company in June 2016, with the U.S. retailer taking a 5% stake in JD.com back then.
In its 2023 annual report, JD.com reported that Walmart owns 9.4% of ordinary shares in the company as of March 31, holding just over 289 million shares.
JD.com did not have a comment when contacted by CNBC.
— CNBC’s Evelyn Cheng contributed to this report.
Israel Sebastian | Moment | Getty Images
Investors who hold exchange-traded funds can often escape a tax bill incurred by those with mutual funds, which are generally less tax efficient, according to investment experts.
ETFs and mutual funds are baskets of stocks, bonds and other financial assets overseen by professional money managers. But they have a different legal structure that bestows ETFs with a “tax magic that’s unrivaled by mutual funds,” Bryan Armour, the director of passive strategies research for North America and editor of the ETFInvestor newsletter at Morningstar, wrote this year.
That tax savings relates to annual capital gains distributions within the funds.
Capital gains taxes are owed on investment profits.
Fund managers can generate such taxes within a fund when they buy and sell securities. The taxes then get passed along to all the fund shareholders, who owe a tax bill even if they reinvest those distributions.
The ETF tax advantage is by virtue of “in-kind creations and redemptions,” which essentially provides for tax-free trades for many ETFs, experts explain. (The ETF’s in-kind transaction mechanism is somewhat complex. At a high level, it involves large institutional investors called “authorized participants,” which create or redeem ETF shares directly with the ETF provider.)
The tax advantage is generally most apparent for stock funds, they said.
For example, more than 60% of stock mutual funds distributed capital gains in 2023, according to Morningstar. That was true for just 4% of ETFs.
Less than 4% of ETFs are expected to distribute capital gains in 2024, Morningstar estimates. Such data isn’t yet available for mutual funds.
Importantly, this tax advantage is only relevant for investors holding funds in taxable accounts, experts said.
It’s a moot point for retirement account investors like those with a 401(k) plan or individual retirement account, which already come with tax benefits, experts said.
The tax advantage “really helps the non-IRA account more than anything,” said Charlie Fitzgerald III, a certified financial planner based in Orlando, Florida, and a founding member of Moisand Fitzgerald Tamayo.
“You’ll have tax efficiency that a standard mutual fund is not going to be able to achieve, hands down,” he said.
However, ETFs don’t always have a tax advantage, experts said.
For example, certain ETF holdings may not be able to benefit from in-kind transactions, Armour said.
Examples include physical commodities, as well as derivatives like swaps, futures contracts, currency forwards and certain options contracts, he said.
Additionally, certain nations like Brazil, China, India, South Korea and Taiwan may treat in-kind redemptions of securities domiciled in those countries as taxable events, he said.
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