- The deadline for Chinese stocks listed on American exchanges is drawing nearer and Chinese state-owned enterprises listed in the U.S. sank in Hong Kong on Monday on dour sentiment.
- Make no mistake about it, neither Washington nor Beijing will benefit from the exodus of Chinese companies listed on American exchanges.
When it comes to cross-border business, it’s almost always personal. Imaging that politics is far removed from the public markets is naïve to say the least, especially when it comes to the world’s two largest economies.
The deadline for Chinese stocks listed on American exchanges is drawing nearer and Chinese state-owned enterprises listed in the U.S. sank in Hong Kong on Monday on dour sentiment.
Not helping matters, another U.S. congressional delegation has visited Taiwan, following in the wake of House of Representatives Speaker Nancy Pelosi’s visit to the island that Beijing considers a renegade province.
China Life Insurance, Aluminum Corp of China (-1.07%) and China Petroleum & Chemical (-0.24%) lost over 2% respectively in early trading, mirroring a decline in their American Depositary Receipts on Friday in U.S. trading.
At the center of the delisting remains an ongoing accounting spat between Beijing and Washington, that would provide American regulators with greater access to the financial data of Chinese firms listed on American exchanges and which the U.S. insists is a necessary prerequisite for maintaining their listed status.
U.S.-listed Chinese firms have already started their exodus from American bourses, heading to exchanges in places like Hong Kong, but finding themselves less than welcome and hoping that Washington and Beijing will find a middle ground.
Some of China’s biggest state-owned airlines could join the exodus as well, denying the capital-intensive business from one the deepest and most liquid capital markets in the world.
Make no mistake about it, neither Washington nor Beijing will benefit from the exodus of Chinese companies listed on American exchanges, yet at the same time, the audit requests are not unreasonable as these firms ought not be allowed to operate to a different standard than the rest of corporate America.
Given that both China and the U.S. have much to lose, it’s entirely possible that an 11th hour deal is reached, with concessions on both sides, that could fuel a rebound in these companies both in Hong Kong and their depository receipts in the U.S. but that would be a highly risk-fueled trade, especially given the state of relations between the two capitals at the moment.
