US bill to audit or delist Chinese companies unlikely to have significant impact on funding avenues, analysts say

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Some 210 Chinese companies listed on US exchanges will get three years to comply with new auditing oversight, or risk being delisted

Companies can still raise capital by listing in Hong Kong or mainland China, made easier by IPO reforms in recent years

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The New York Stock Exchange building. Some 210 US-listed Chinese companies are under scrutiny to comply with US auditing oversight under a bipartisan bill awaiting President Donald Trump’s signature. Photo: AP Photo

Ethan PaulandYujing Liu

Published: 7:43pm, 3 Dec 2020Updated: 7:43pm, 3 Dec 2020

Chinese companies and their investors are likely to shrug off the latest US bill that could delist them from American exchanges as they have alternative capital-raising venues at home. It may inject urgency in more listing reforms in Hong Kong and mainland China.

The Holding Foreign Companies Accountable Act, passed by the House of Representatives earlier this week, would give the more than 210 Chinese companies three years to comply with auditing oversight rules applied to other listed companies. President Donald Trump is expected to sign it into law, according to several US media reports.

“I don’t think this is a big issue or event for the Hong Kong and China markets,” said Edmond Huang, head of China equity strategy at Credit Suisse, during a conference call on Thursday. “Of course, compared to the US market, liquidity in Hong Kong is not that great but it is getting better right now compared to 2019. And the doors will open a little wider in 2021.”

The average trading volume in Hong Kong has increased by as much as 140 per cent this year from a year earlier on a monthly basis, according to stock exchange data. A landmark reform in April 2018 that opened doors to companies with the so-called weighted voting rights (WVR) structures laid the groundwork for the homecoming of US-listed Chinese companies.

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The bill, earlier passed by the Senate in May, has spurred a spate of secondary listings in Hong Kong by such companies. They included e-commerce group and this newspaper’s owner Alibaba Group Holding, gaming giant NetEase, e-commerce platform JD.com and its health care unit JD Health and restaurant chain Yum China.

US bill to audit or delist Chinese companies unlikely to have significant impact on funding avenues, analysts say

Some 210 Chinese companies listed on US exchanges will get three years to comply with new auditing oversight, or risk being delisted Companies can still raise capital by listing in Hong Kong or mainland China, made easier by IPO reforms in recent years

Some 210 Chinese companies listed on US exchanges will get three years to comply with new auditing oversight, or risk being delisted

Companies can still raise capital by listing in Hong Kong or mainland China, made easier by IPO reforms in recent years