Because Beijing’s efforts have not yet dispelled concerns regarding the companies’ eligibility to remain listed on Wall Street, INVESTORS are shifting a greater portion of their shares in Chinese e-commerce giants to the Hong Kong market.
Bloomberg calculations based on stock exchange data show that as of Tuesday (April 19), 77% of JD.com’s shares are circulating in Hong Kong’s clearing and settling system, compared to 44% at the beginning of the year.According to the data, Alibaba Group Holding’s share of Hong Kong-listed shares increased from 53% during that time to 56%.
Even though China changed a rule that had been in place for a decade and could have made it easier for US regulators to get full access to auditing reports, the majority of this year’s conversions at Alibaba and JD.com happened this month.
The actions taken by shareholders at Alibaba and JD.com highlight that the US delisting risk remains a concern, despite the fact that other companies that are listed in both Hong Kong and New York haven’t seen a similar scale of share conversion this year.Investors can avoid direct regulatory shocks that could result in the suspension of trading and liquidation of their stock in the United States by reducing their exposure to American depositary shares.
Louis Lau, fund manager at Brandes Investment Partners,
stated, “We are buying incrementally through the Hong Kong shares instead of US shares.” Although Beijing’s efforts have reduced the likelihood of delisting, the odds remain at 50%.The question of how China will grant US audit access and to which companies is now the focus of implementation.
The requirement that all publicly traded American companies provide access to audit work papers has divided the United States and China for two decades.Firms face expulsion on the off chance that they avoid prerequisites for three straight years, meaning they could be started off the New York Stock Trade and Nasdaq when 2024.
We value your feedback. Let us know what you think.Send us a message at btuserfeedback@sph.com.sg. The US Securities and Exchange Commission has included at least 23 Chinese businesses on a list of those violating auditing regulations.
There are in excess of 200 Chinese firms that are recorded in the US, of which around 20 organizations likewise have a posting status in Hong Kong, and that gathering is supposed to increment.To register a conversion, holders of depositary receipts can return their US shares to the depositary bank, which converts them into Hong Kong-listed shares at a predetermined ratio.The proportion of Alibaba and JD.com shares listed in Hong Kong nearly doubled last year.
Undoubtedly,
a change doesn’t balance every one of the dangers presented by US delisting.When shares are moved back to Hong Kong, investors will have to deal with a less liquid market and possibly lower valuations.
This year, Hong Kong’s Hang Seng Tech Index has dropped 27%, and the risk of US listings being abandoned remains a major concern for the industry.After the Chinese ride-hailing company said it would delist its shares that are traded in the US before finding a new location for the stock, Didi Global fell on Monday.
Didi shares lost 6.9%, Alibaba Group Holdings lost 4.3%, and JD.com shares lost 5.5% on Wednesday.3.4% of Baidu fell.
