Alibaba Group Holding Ltd (NYSE: BABA) and Pinduoduo Inc (NASDAQ: PDD) were among US-listed Chinese stocks that slumped last week after some of the country’s largest state-owned companies revealed plans to delist from US exchanges amid conflict over audits and the worsening China-US relationship.
State-owned Chinese firms to delist from US exchanges
Other Chinese stocks that dropped include after PetroChina co, China Petroleum & Chemical Corp, and China Life Insurance Co. The Golden Dragon Index Index dipped around 2.8% during Friday’s trading session before a reversal later in the day drove the gauge 0.2% up.
Since American auditors can’t confirm their financial audits, 200 Chinese firms, including Baidu Inc. and Alibaba, listed in US exchanges are likely to face delisting threats. Moreover, according to Redmond Wong, a market strategist at Saxo Markets, state-owned companies are able to acquire data and information that the Chinese authorities might be reluctant to provide to foreign regulators.
Under criticism from Chinese officials who worried the company’s massive volumes of data might be accessible to foreign powers, ride-hailing behemoth Didi Global Inc. revealed intentions to delist from the New York Stock Exchange last year. Alibaba has declared that it would look to the list first in Hong Kong.
More Chinese firms expected to delist from the US exchanges
GAM Investment Management investment director in Zurich, Jian Shi Cortesi, stated, “This has been an overhang on Chinese ADRs. We expect more Chinese firms to voluntarily delist from the US or move their primary listings to Hong Kong.”
Concerning giving American auditors access to the audit files of Chinese enterprises, the US and Beijing have been in conflict for 20 years, and mediators have failed to reach a compromise.
The Nasdaq Golden Dragon Index has been under pressure as a result of these concerns and Beijing’s regulatory assault on technology companies; the index is down 65% from its record high, which it achieved in February of last year. Nonetheless, the index has managed to recover by 40% from this year’s low point.