US-China talks on delistings advance with Hong Kong inspections
- Chinese stocks in the US surge upon news of a plan for American inspectors travel to the city to review businesses’ audit documents
- Such a move would be a major step toward alleviating fears of mass forced delisting of US-listed Chinese stocks
Talks between Beijing and Washington to avoid the delisting of about 200 companies from New York stock exchanges are gaining steam with a plan to let American inspectors travel to Hong Kong to review Chinese businesses’ audit documents.
Chinese regulators have instructed major accounting firms to prepare to bring the audit work papers of the US-listed Chinese companies to Hong Kong, where they can be reviewed by the Public Company Accounting Oversight Board, according to a person who asked not to be identified as the discussions are private.
The conversations, which remain ongoing, could result in a significant advance in a years-long stand-off over the inspections, which are required for all US-traded companies.
The clock is ticking to avoid a congressionally imposed deadline of 2024 for kicking off businesses that do not comply from the New York Stock Exchange and Nasdaq.
The Nasdaq Golden Dragon Index, which tracks Chinese firms trading in the US, surged the most in more than two months after The Wall Street Journal reported on the discussions earlier on Thursday.
Shares of US-listed tech giants including Alibaba Group Holding Ltd., JD.com Inc. and Pinduoduo Inc. all rose at least 9 per cent. Meanwhile, NetEase gained 5.1 per cent, while electric-vehicle makers Nio Inc. and Li Auto Inc. added 6.5 per cent and 4.2 per cent, respectively.
Alibaba is the owner of the South China Morning Post.
The PCAOB declined to comment. The China Securities Regulatory Commission and the US Securities and Exchange Commission did not immediately respond to requests for comment.
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“This is a fascinating development,” said Ed Moya, senior market analyst at Oanda Corp. “An official confirmation is needed but expectations were growing that this would get done as both countries are dealing with economic fragility,” he added.
Such a move would be a major step toward alleviating fears of mass forced delisting of US-listed Chinese stocks, something that has weighed on shares for more than a year.
Earlier this month, China Life Insurance Co., PetroChina Co. and China Petroleum & Chemical Corp. were among a group of state-owned companies that announced plans to delist from American exchanges. Dow Jones reported on the news earlier.
The rally in US trading follows what was the best day in nearly four months for Hong Kong’s Hang Seng Tech Index, which rose 6 per cent on Thursday. That helped lead the city’s benchmark Hang Seng Index to a 3.6 per cent gain, making it the best performer among Asia’s major equity gauges.
