Hong Kong-listed mainland Chinese companies seen most at risk if US imposes curbs on capital flows into China

While the risk of Washington imposing curbs on US capital flows into Chinese equities remains remote, Societe Generale estimates that 10 stocks in Hong Kong could be exposed the most

For US investors to fully divest their equity holdings, it would take them 180 days on Hong Kong exchange and 195 days in the US markets, according to Goldman Sachs estimates

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The corporate flag for Hong Kong Exchanges and Clearing and the Chinese flag fly outside the Exchange Square complex in Hong Kong. Photo: Bloomberg

Published: 10:01am, 4 Oct 2019Updated: 10:55pm, 4 Oct 2019

Mainland Chinese companies listed in Hong Kong will be severely hit by US proposals to restrict capital flows to China, particularly defence and technology, if the US-China trade war escalates and spreads to global financial markets, according to Societe Generale.

Media reports last week suggested that President Donald Trump was mulling whether to impose limits on US investors’ portfolio flows into China, including delisting Chinese firms from US stock exchanges.

And although the White House later called the reports as “fake news”, the French investment bank published a study in which it analysed the potential impact of such a risk materialising, identifying 10 Chinese companies that could be affected by such a move.

“An overall assault on China equities by the US administration is a tail risk with a really remote probability of happening,” said Frank Benzimra, head of Asia equity strategy at SocGen. “But there is a possibility that some more targeted strategy [could] be put in place.”

Specifically, Benzimra said there were concerns in the US that their capital was funding Chinese companies associated with the military and makers of surveillance and monitoring equipment.