Shares of HutchMed and four others named by US SEC’s audit list tumble in Hong Kong, Shanghai in knee jerk reaction to regulatory risks

HutchMed’s shares plunged by as much as 16 per cent to at least a 12-month low of HK$24.25, tracing the 15 per cent decline overnight in New York

Yum China Holdings, which runs the KFC and Pizza Hut fast food chains in China, declined by as much as 12 per cent in Hong Kong, after falling 15 per cent in New York

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People walk before flags of CK Hutchinson Holdings outside the company’s headquarters in Hong Kong on March 21, 2019. Photo: AFP

Published: 12:05pm, 11 Mar 2022Updated: 4:29pm, 12 Mar 2022

HutchMed, the pharmaceutical unit of tycoon Li Ka-shing’s flagship CK Hutchison Holdings, led declines among four Hong Kong-listed stocks on Friday after being named in a list of foreign companies liable to US accounting inspection law.

HutchMed’s shares plunged by as much as 16 per cent to at least a 12-month low of HK$24.25 before closing 9.5 per cent lower at HK$26.30, tracing the 15 per cent decline overnight in New York. Yum China Holdings, which operates the KFC and Pizza Hut fast food chains in China, declined by as much as 12 per cent in Hong Kong, after its American depositary receipts (ADRs) fell 15 per cent in New York.

The stocks were the first of 270 identified by the United States Securities and Exchanges Commission (SEC) on a list of New York-listed companies liable to the Holding Foreign Companies Accountable Act (HFCAA), which took effect on December 18, 2020. Under the law, foreign companies may be delisted if they fail to submit their audit papers to a US accounting oversight body for three consecutive years.

The knee jerk reaction to the latest administrative action underscores how fragile investor sentiments are, amid a global surge of the Covid-19 pandemic’s Omicron variant, as well as the war in Ukraine, analysts said. The reason these companies were identified by the SEC was because they were the first to file their 2021 annual reports, China Renaissance said in a report after the New York rout.

“We expect renewed regulatory uncertainty to dampen investor sentiment and potentially remain an overhang on Chinese ADR valuations,” said Renaissance’s analyst Bruce Pang.

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