Lufax stock price crashes below $1 but a rebound is still possible

Lufax Holdings (NYSE:LU) stock price was sitting at a record low as concerns about its slow growth continued. The shares have moved below the important support level of $1 after it published weak financial results and made a big acquisition. This plunge has brought its total market cap to about $1.8 billion.

Growth concerns remain

Lufax Holdings is one of the oldest fintech companies in China. The firm offers a platform where individuals and companies can easily borrow money from leading institutions in the country.

Lufax experienced strong growth a few years ago as the Chinese economy was booming. This rally saw the stock peak at about $17 in 2020. Recently, the country’s change of fortunes has had a negative implication on its operations.

The most recent results showed how badly the company is doing. Its total income came in at RMB 8,050 million or $1.1 billion, which was a 40% YoY decline. Its net profit plunged to RMB 131 million from the previous RMB 1.3 billion. This was a 90% YoY decline.

Other metrics were not encouraging. Delinquency rates jumped during the quarter as many small companies in China continued struggling. As a result, the total Non-Performing Loan (NPL) ratio rose to 1.9%. The company’s CEO said:

“As high quality demand for SBO loans remained weak and we continue to prioritize prudence in our strategic execution. New loan sales decreased slightly from RMB53.5 billion in the second quarter, to RMB50.5 billion.”

As its growth slows in Mainland China, the company decided to expand its business in Hong Kong. It acquired Ping An OneConnect Bank, the third-biggest virtual bank in Hong Kong. The company spent about $120 million for this acquisition.

Still, there is a ray of hope for Chinese companies. The most recent data shows that the economy is bottoming. According to the National Bureau of Statistics (NBS), the economy expanded by 4.9% in Q3. Additional data published on Wednesday revealed that China’s industrial production and retail sales have crawled back.

Therefore, these are indications that the economy is ready to take off after the initial challenges we saw in Q1 and Q2. This progress means that embattled Chinese companies could recover soon.

The biggest risk for Lufax stockholders is the ongoing geopolitical tensions between the US and China. Also, investing in Chinese companies is always risky because of the difficulty of verifying information from these firms.

Lufax stock price forecast

LU chart by TradingView

The daily chart shows that the LU stock price has been in a strong bearish trend in the past few months. In this period, the shares have crashed below the 50-day and 25-day Exponential Moving Averages (EMA).

Lufax share price has formed a falling wedge pattern. In price action analysis, this pattern is one of the most bullish signs. Therefore, while the situation is not looking good, this pattern is a ray of hope. 

As such, there is a likelihood that the stock will bounce back as buyers target the important resistance point at $1.85, the highest point on July 28th. This price is about 85% from the current level.

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