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US SEC’s Move To Implement Law Top Delist Foreign Firms Causes Slump In Chinese Tech Stocks


03/25/2021


US SEC’s Move To Implement Law Top Delist Foreign Firms Causes Slump In Chinese Tech Stocks
Following the United States securities regulator adopting measures that paves the way to begin the process of delisting foreign companies from American stock exchanges, if they are unable to comply with US auditing standards, there was a sharp drop in the stocks of dual-listed Chinese companies in Asia on Thursday.
 
Chinese tech companies are already facing unprecedented regulatory crackdown in their home country over concerns that the local companies have built market power that is against market competition and this latest move by the US Securities and Exchange Commission (SEC) added on to that pressure in China.
 
This new move that will pave the way for implementation of the Holding Foreign Companies Accountable Act, which was signed into law by the former US President Donald Trump in December, which is designed to primarily remove Chinese companies from stock exchanges in the US if the companies are unable to comply with American auditing standards for three straight years.
 
The SEC said in a statement that the regulations under this new also will also require foreign companies to show evidence to the SEC of them not being owned or controlled by an entity of a foreign government as well as declare whether any official of the Chinese Communist Party is also member of their board.
 
The reputation of the US capital markets would be bit by the move of the SEC, said China’s Foreign Ministry.
 
“It is clearly discriminatory against Chinese companies, it is wanton political suppression of Chinese companies listed in the US,” spokeswoman Hua Chunying said Thursday. “It deprives the U.S. public and investors in sharing in Chinese businesses’ growth. It will harm the U.S.’s position as a capital market.
 
“We urge the U.S. to stop politicizing security regulation, stop discriminating practices against Chinese companies, and provide a fair just and non discriminatory business environment for all businesses listed in the U.S.”
 
There was no comment on the issue by the China Securities and Regulatory Commission (CSRC).
 
There was a sharp sell-off of the US-listed Chinese companies which have also been listed at the local stock exchange in since the last two years after news of the SEC move emerged from the US. 
 
There was a drop in the stocks of Baidu Inc which debuted on Tuesday, as well as in the stocks of Alibaba Group Holding Ltd, JD.Com and Netease Inc. These falls were much larger than the wider Hong Kong Hang Seng Index which fell by 0.07 per cent and Hang Seng Tech Index which dropped by 1.2 per cent.
 
“A lot of investors thought the U.S. and the Biden administration would be more amicable towards China and things would be easier, but this news shows that it is going to be just as tough,” Wealthy Securities Managing Director Louis Tse said.
 
Following other reports about Beijing considering creating a state-backed joint venture with domestic tech firms to oversee the user data collected by Chinese tech companies also put the Chinese-listed stocks of Chines tech companies under pressure, said DailyFX strategist Margaret Yang.
 
“The latter probably marks a further tightening of government control over the technology sector,” she said.
 
(Source:www.financialpost.com)