This article first appeared in Capital, The Edge Malaysia Weekly on October 19, 2026 - October 25, 2026

ASK undergraduate Min why she shops for clothes online rather than at the mall, and the answer comes quickly. “It is convenient, and there is a wide variety of choices,” she says. But when asked what she dislikes about Shein’s clothes, she is just as quick to point to the “inconsistent quality in products”.

Min, who asks to be identified by her first name only, says she orders from online platforms two or three times a month, typically spending S$30 (RM95) to S$60 each time. She buys from Shein occasionally, alongside Taobao, Shopee, local blogshops and Pinduoduo. PDD Holdings, Pinduoduo’s parent company, also owns Shein rival Temu.

She is aware of criticism over labour conditions in Shein’s supply chain and the environmental cost of fast fashion, but says it has not changed what she buys. Other shoppers, however, say it has. Of the dozen online shoppers The Edge Singapore spoke to, half said they were aware of the criticism and had changed their buying habits, mostly by buying less rather than giving up on the platforms altogether.

Investors in Shein’s Hong Kong initial public offering have a quality question of their own. Shein priced its shares at HK$48.56, raising US$1.74 billion (RM7.1 billion) and valuing the company at about US$26.5 billion. In an Aug 5 report, Maybank Securities put Shein’s 2022 peak valuation at US$98 billion, which makes the IPO valuation roughly a quarter of that.

In an Oct 8 report, a team of Bank of America (BOA) analysts initiated coverage of this stock with an “underperform” call. They acknowledge that Shein, while among the top three in the global fashion industry, suffers from low earnings visibility. “We expect high revenue volatility given the company’s large scale but thin margins,” the BOA analysts say. In addition, tariff uncertainty, especially in the context of how China’s broader internet and consumer sectors are already trading at “distressed” levels, further weighs on this counter. Their target price is HK$29, which is below Shein’s Oct 15 closing price of HK$36.50. Since the stock started trading on Sept 1, it has yet to trade above the IPO price.

Shein was established in China in 2008. In late 2021, the company shifted its headquarters to Singapore, with Singapore-registered Roadget Business becoming the legal entity running Shein’s global website, according to a Feb 17, 2022, Forbes report. By then, founder Xu Yangtian had also become a Singapore permanent resident.

Shein said the move was intended to support its growth in Southeast Asia, though it came as China was drafting overseas listing rules targeting companies whose senior managers were mostly Chinese citizens or living in China.

Its suppliers, however, remain in southern China, where manufacturing clusters give the company “thousands of suppliers, very short production runs and the ability to reorder successful products within days”, says Ruben Dalfovo, an investment strategist at Saxo.

This year, Shein has leaned back towards home. “We will continue to deepen our roots in Guangdong and are investing more than RMB10 billion (RM6.1 billion) to build Shein’s smart supply chain system, working together to create a world-class fashion industry cluster,” Xu told Guangdong’s high-quality development conference in February, based on a report from China Daily on Feb 26.

The company only arrived in Hong Kong after two false starts, notes Charu Chanana, chief investment strategist at Saxo. It first filed confidentially for a US listing in 2023, then shifted to London in 2024 after running into political and regulatory opposition in the US. When the London route also stalled amid regulatory scrutiny and the need for Chinese approval, Shein turned to Hong Kong, she says. China’s securities regulator approved Shein’s filings for the Hong Kong listing on July 10.

Shein’s China-linked geopolitical risk “is real and not settled”, says Ben Ho, strategist at Maybank Securities. Scrutiny of Xinjiang cotton was a concern for regulators in New York and London, Ho says, though he sees it as an anti-China excuse, pushed by lobbying from rival retailers in the US and Europe. The bigger issue, in his view, is whether Shein’s profits are sustainable.

“Investors don’t normally penalise a business simply because Hong Kong was not its first-choice listing venue,” says ­Charu. “I would say the journey itself reminds investors that regulatory and geopolitical risk are structural parts of the Shein story. Moving exchanges did not make those risks disappear.”

The US scrapped its “de minimis” exemption for low-value parcels from China on May 2, 2025. Together with new US tariffs, this means China-made goods bought on Shein and shipped to the US now face tax rates of 10% to 87.5%, up from 0% to 62.5% previously, notes the company’s prospectus. Shein’s US revenue fell 14% year on year in 1QFY2026, and the US share of revenue dropped to about 23% that quarter, down from 29% in FY2023, notes Maybank’s Ho.

Group revenue grew 8% to US$41.8 billion in FY2025, down from 21% growth a year earlier, while net profit fell 39% to US$2.1 billion. In 1QFY2026, revenue grew just 1.1%, and Shein booked a US$99 million net loss, due to a US$328 million non-cash charge on convertible redeemable preferred shares.

At the same time, fulfilment costs rose from 42% of revenue in FY2023 to about 48% in 1QFY2026, while marketing climbed from 11% to 16%, leaving an operating margin of about 3%, says Maybank.

Europe, which made up 35% of Shein’s FY2025 revenue against 24% for the US, now faces a similar squeeze. On July 1, the EU scrapped its duty-free entry for parcels worth up to €150 (RM687), replacing it with a flat €3 duty on each category of item in a parcel. Shein has warned in its prospectus that the impact in the EU could match or exceed what it saw in the US. France’s per-item levy on ultra-fast fashion, from €0.50 up to €12 an item, kicked in on Sept 1, Shein’s listing day, says Ho.

These charges are flat fees, so they bite hardest on cheap orders like Shein’s, which average about US$39, says Maybank. “There is just no spare capacity to absorb another round of duties,” says Ho. Passing the costs on to shoppers is no easy fix either, he adds, as Shein raised US prices after the de minimis exemption ended, and its US revenue still fell.

The criticism that shoppers like Min have shrugged off has dogged Shein for years. In 2022, lab tests commissioned by Bloomberg News found that cotton in two batches of Shein garments matched cotton from Xinjiang, where China has been accused of using Uyghur forced labour.

When US lawmakers pressed the company on the issue in May 2023, Shein said in a statement that it had no suppliers in Xinjiang and had zero tolerance for forced labour. Shein’s carbon footprint also grew in 2024, with greenhouse gas emissions rising 23% to 26.2 million tonnes, the company reported in its sustainability report.

With more than US$14 billion in cash and short-term investments as at March 31, based on its prospectus, Shein was hardly short of money. Lorraine Tan, Morningstar’s director of equity research for Asia, wrote in an Aug 27 report that she suspects the IPO listing was to allow private equity investors to exit.

“Shein wasn’t raising this money because it needed a lifeline. This was about solving a structural problem, not a balance sheet one,” says Saxo’s Charu. “Private investors who backed the 2022 round at nearly US$100 billion have been sitting on that position for years with no exit, and a listing was the only realistic way to give them liquidity and a market-set price.”

Those backers have had to settle for far less than they once hoped. Pre-marketing had pencilled in a valuation of US$40 billion to US$50 billion, the range Maybank used in its report. By the time the books opened in late August, the top of the range had come down to about US$26 billion to US$28 billion, says Maybank’s Ho. “That is what the market would actually pay, not exactly a last-minute accident,” he says. Weak 1QFY2026 results and the new European levies had weighed on the valuation, and demand during the book build was lukewarm, Ho adds.

At its final IPO price of HK$48.56, Shein was valued at more than 15 times forward earnings against about 7.4 times for PDD Holdings, the owner of rival Temu, says Charu. “That was one reason the IPO price didn’t necessarily look cheap despite the enormous decline from the 2022 valuation,” she says. After its first week of trading, Shein was worth closer to US$21 billion. “US$21 billion is much easier to defend than US$27 billion, but I wouldn’t call it obviously cheap,” Charu adds.

On Sept 14, investment bank Jefferies initiated coverage on Shein with an “underperform” call and a HK$26 target price. That is about 16% below the company’s closing price on Sept 30.

On Sept 28, Shein reported a 53% plunge in operating income for 1HFY2026 ended June. The company blamed higher freight costs, as the Middle East conflict drove up oil prices, along with slower growth in its core retail business. The next day, Shein’s shares fell as much as 14% before closing 11% lower, its steepest one-day drop since listing. Xu said in a statement that tariff headwinds and logistics cost volatility were “likely to persist” in the second half.

But the pressures facing Shein do not necessarily apply to fast fashion as a whole. “Fast fashion as a category is still investable,” says Maybank’s Ho, pointing to Zara owner Inditex’s full-price sales, local fulfilment and lack of reliance on de minimis rules. “Ultra-fast fashion, China-origin, [low-ticket] cross-border e-commerce is just another animal, though.” 

The real question, Ho says, is whether Shein can outrun the tariff drag by becoming a marketplace, where outside brands sell through its app, and Shein keeps a 10% to 20% commission. 

Service revenue, which includes those commissions, rose from about 3% of revenue in FY2023 to more than 14% in 1QFY2026, according to the prospectus. It carries roughly double the group’s operating margin, and clearing 20% of revenue would be “a significant milestone”, says Ho. He thinks Shein could get there by late 2027 if the current trajectory holds, and only if its own retail business does not shrink faster than its marketplace grows.

“A more constructive part of the story is Shein’s gradual shift from a pure retailer to a retailer-plus-platform,” says James Ooi, market strategist at Tiger Brokers. Investors, Ooi adds, will have to weigh the added compliance and reputational risks of hosting third-party merchants. 

None of this is likely to stop fast-fashion consumers like Min from filling their carts. People will keep buying cheap clothes, says Saxo’s Ruben. “Shein does not need to lose its customers for the investment case to weaken,” he adds. “Cheap clothes can remain popular while the economics behind selling them become much less cheap.”

Lynnette Tania Lee is an intern at The Edge Singapore. This article was first published in The Edge Singapore on Oct 12, 2026.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.