Five Chinese state-owned enterprises will delist from NYSE

Five Chinese state-owned enterprises will delist from NYSE, On Friday, five Chinese state-owned firms that are publicly traded in the United States and whose audits are now being investigated by the United States securities authority announced that they would voluntarily delist from the New York Stock Exchange.

Oil giant Sinopec (600028.SS) and China Life Insurance (601628.SS), Aluminium Corporation of China (Chalco) (601600.SS), PetroChina (601857.SS), and a separate Sinopec entity known as Sinopec Shanghai Petrochemical Co (600688.SS) have all stated that they intend to submit an application to delist their American Depository Shares during the course of this month. They are going to continue to list their products in both Hong Kong and mainland China.

The United States Securities and Exchange Commission (SEC) warned in May that the five corporations in question, along with a large number of others, did not comply with auditing requirements established in the United States.

The corporations’ announcements, which come at a time when tensions are rising as a result of the visit of the Speaker of the House of Representatives of the United States of America to Taiwan, make no mention of the controversy.

If China does not comply with Washington’s demand for complete access to the books of U.S.-listed Chinese companies, then Chinese companies may be barred from trading on U.S. exchanges. These talks are taking place between Beijing and Washington in an effort to resolve a protracted audit dispute that has been going on for quite some time.

Under the pretext of protecting the country’s sovereignty, Beijing has made it illegal for foreign auditors to inspect audit records produced by domestic accounting firms.

“These companies have strictly complied with the rules and regulatory requirements of the U.S. capital market since their listing in the U.S. and made the delisting choice for their own business considerations,” the China Securities Regulatory Commission (CSRC) said in a statement. “These companies have been listed in the U.S. since they have strictly complied with the rules and regulatory requirements of the U.S. capital market.”

Additionally, it stated that it would maintain “open engagement with relevant international regulatory agencies.”

The dispute over monitoring, which has been brewing for more than 10 years, came to a climax in December when the Securities and Exchange Commission (SEC) announced rules that may potentially limit trading in Chinese businesses under the Holding Foreign Companies Accountable Act. It was reported that 273 businesses were in danger.

Among them are some of the most important and successful corporations in China, such as Alibaba Group Holdings, JD.com Inc (9618.HK), and Baidu Inc. with a listing in New York The Chinese e-commerce giant Alibaba said last week that it would change its secondary listing in Hong Kong into a dual primary listing. Analysts believe that this move may make it simpler for Alibaba to transfer primary listing venues in the near or distant future. continue reading

On Friday, shares of China Life Insurance and oil major Sinopec that are traded in the United States plummeted by 3.06% and 3.22% respectively. Both Aluminium Corporation of China and PetroChina saw their share prices decline by 2.80% and 3.03% respectively. The decrease for Sinopec Shanghai Petrochemical Co was 3.29 percent.

Both the New York Stock Exchange (NYSE) and the Public Company Accounting Oversight Board (PCAOB), which is an audit watchdog regulated by the Securities and Exchange Commission (SEC), declined to comment on the matter.

LOSING PATIENCE?

It was not obvious what, if any, ramifications the delistings have for the ongoing negotiations regarding the audit arrangement. It was revealed by Reuters a month ago that de-listing sensitive firms will not bring China into conformity with U.S. standards. This is due to the fact that the PCAOB needs the ability to conduct inspections retrospectively. On Friday, a person who is familiar with the situation stated that the position taken by the agency has not altered. continue reading

The delistings were viewed as a negative indicator by several people who follow the market.

According to Kai Zhan, senior counsel at the Chinese legal firm Yuanda, which specializes in U.S. financial markets, “China is sending a message that its patience is wearing thin.”

The companies reported that the volume of their publicly listed shares in the United States was low in comparison to the volumes on their other major listing venues. Despite this, the volume of trades in the shares of the five firms that are listed in the United States on Friday was significantly higher than their 10-day average.

It was said by PetroChina that it had never raised follow-on capital from its U.S. listing and that it’s Hong Kong and Shanghai bases “can cover the company’s fundraising requirements.”

Even if they continue to hold out hope that the audit disagreement would one day be addressed, global fund managers who hold U.S.-listed Chinese equities are gradually transferring their holdings towards counterparts that are traded on the Hong Kong Stock Exchange. continue reading

In an email, the Chief Investment Officer of KraneShares, which has a fund focused on Chinese technology that is listed on the New York Stock Exchange, Brendan Ahern stated that “these firms are very thinly traded with very modest US market value thus it is not a loss for US capital markets.”

According to him and several other experts, they feel that the delistings could still assist in preparing the way for an audit deal.

“This is something that we see as a good indicator. This is in line with our belief that China would be the one to decide which firms will be permitted to be listed in the US and are therefore open to audit inquiries by the SEC “Analysts from Jefferies penned the report.

Both China Life and Chalco have stated that they will submit their delisting applications on August 22, with the delisting taking effect ten days after that. Both Sinopec and PetroChina stated that their applications would be submitted on August 29. Sinopec’s full name is the China Petroleum & Chemical Corporation.

Following a decision made during the Trump administration to place restrictions on investment in Chinese technology companies, China Telecom (0728.HK), China Mobile (0941.HK), and China Unicom (0762.HK) was delisted from the United States market in 2021. In the face of ongoing tensions, the Biden administration has decided to maintain the status quo with regard to that ruling.