China Duty Free Hits Rare Limit‑Down As Hong Kong Shares Fall Over 22% In Three Days — What Happened To The “Duty‑Free King”?

On the first trading day of the Year of the Horse, while Shanghai and Shenzhen indices posted strong gains, China Duty Free opened lower and quickly hit the limit‑down, remaining at that level through the close. The company recorded turnover of RMB 4.18 billion for the day, with sell orders at close totaling approximately RMB 761 million. In the Hong Kong market, the stock has declined by more than 22% over the past three trading sessions.

During the fourth quarter of last year, amid a consolidation in technology shares, China Duty Free delivered a single‑quarter gain exceeding 32%. As a long‑standing favored holding, public funds increased their position by 15.2 million shares in that quarter. Following the valuation rebound, however, investor views diverged and several funds reduced holdings or removed the stock from their heavy‑weight lists.

On February 24, China Duty Free’s intraday limit‑down persisted to the close, and its Hong Kong listing fell 10.51% for the session. The stock had already posted declines of 5.44% on February 20 and 8.88% on February 23. Market reports attributed the sell‑off to adverse outcomes in duty‑free concession tenders at Beijing and Shanghai international aviation hubs. The company confirmed it lost part of the Shanghai Airport concession and noted it had previously disclosed related information. Regarding holiday sales, management said it only had single‑day sales figures for regions such as Sanya and that such partial data did not meet the threshold for an official announcement; official figures should prevail.

As the sole domestic operator holding a full duty‑free license, China Duty Free has long been a core public fund holding and once traded as high as RMB 379 per share during the “core asset” rally. Although the share price experienced a notable correction between 2023 and 2024, the company’s industry leadership and high barriers to entry have kept it under sustained institutional attention, with public fund holdings consistently above 5% in recent quarters.

By the end of last year, 108 funds held the stock as a major position, with aggregate holdings exceeding 66 million shares. In the fourth quarter, supported by favorable developments such as the Hainan customs closure, the stock’s quarterly gain exceeded 32%, and several funds—including Huaxia Media Internet, Wanjia Quality Life, and Invesco Great Wall Quality Growth—each added more than one million shares. Conversely, products such as Invesco Great Wall Emerging Growth and Changsheng Tongzhi executed substantial reductions, and some funds removed the stock from their heavy‑weight lists. One fund noted in its quarterly report that although the duty‑free sector showed signs of recovery, sustainability remained uncertain and valuations had become more reasonable, prompting reductions in consumer and duty‑free holdings.

Despite recent weakness, many institutions remain constructive on China Duty Free and the broader consumer and duty‑free sectors. A northern China public fund observed that consumer sectors should benefit from the Federal Reserve’s easing cycle. Recent weakness in PPI and CPI largely reflected global liquidity tightening, which weighed on corporate profits and consumer spending. With the onset of rate cuts, price indices are expected to recover modestly, supporting consumption. Narrowing U.S.–China interest differentials and economic recovery could also encourage continued foreign capital inflows, and consumption remains a favored allocation for overseas investors. Historically, consumer sectors led by liquor and food & beverage have shown negative correlation with the U.S. 10‑year Treasury yield, and mid‑to‑high‑end consumption categories such as liquor and duty‑free goods are closely linked to economic recovery.

Some niche travel‑related segments are also viewed favorably. A northern China fund manager highlighted opportunities in aviation and related travel chains. He noted that global airfares have risen about 25% versus 2019, while domestic fares have lagged due to a reduced share of business travel; this drag is expected to dissipate by 2026. Recent visa‑free policies and travel incentives have pushed airline load factors to record levels, and in some short‑haul markets airfares are now cheaper than high‑speed rail, providing a basis for fare increases.

The manager added that the sector benefits from lower oil prices and a stronger renminbi. Because many airlines carry U.S. dollar‑denominated debt, currency appreciation reduces debt burdens, while falling oil prices materially improve profit elasticity for carriers. These factors together support a constructive outlook for the aviation sector.