Chinese Wall Street companies are likely to cut out of US capital markets over the next three years as tensions between Beijing and Washington remain, according to global asset management firm TCW Group on CNBC.
“I think for many Chinese companies listed on the New York Stock Exchange, the game is essentially over,” David Loevinger, head of emerging market research at TCW Group, told CNBC on Wednesday. “It’s an issue that has been pending for 20 years and has not been resolved yet.”
The U.S. Securities and Exchange Commission finalized a law enforcement framework in December that would allow market regulators to “block” the trading of US-listed foreign companies if their auditors do not comply with information requests. by US regulators.
The law was passed in 2020 after Chinese regulators repeatedly denied requests by the Public Interest Accounting Board to inspect the audits of Chinese companies listed in the United States.
“Given the level of mistrust between Washington and Beijing and the fact that bilateral relations are not going to improve any time soon,” there is no way the issue can be resolved in the coming years, “Loevinger said.
“Thus, I estimate that by 2024, most Chinese companies listed on Wall Street will stop trading in the US. Most will return to Hong Kong or Shanghai,” he added.
Less than six months have passed since its listing on the New York Stock Exchange, and Chinese transportation giant Didi has said it will begin the process of removing it from the Wall as it plans to list it in Hong Kong.
Chinese regulators are reportedly unhappy with Didi’s decision to import her into the United States without first resolving outstanding cyber security concerns. Regulators have told company executives they need to draw up a plan to remove Didi from the US over concerns about data leaks.
In addition to Didi, many of the leading Chinese Internet companies (Alibaba, Baidu, NetEase, Weibo) trading in the US have been double-listed – including on the Hong Kong Stock Exchange.
“We are already at a turning point,” Loevinger said, referring to Didi’s announcement of her delisting. “I do not think the Chinese government will allow US regulators to have unhindered access to Chinese companies’ internal audit documents.”
“And if US regulators do not have access to these documents, then they can not protect the US market from fraud,” he said.
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