Alibaba and JD.com shares plunge after SEC names Chinese companies for possible delisting

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Ali Baba (BABA) fell more than 6% on Friday in Hong Kong. Its U.S.-listed stock ended down 7.9% on Thursday.
JD.com (J.D.) fell nearly 17% in Hong Kong, after closing down 16% on Wall Street. Baidu (BIDU) down 5%, after a 6.3% drop in the United States.

Other companies with dual listings in the US and Hong Kong also fell sharply.

The sharp drop in Chinese internet and technology stocks, which are typically listed in both New York and Hong Kong, was due to “concerns that more companies will come to market”. [US] list in the coming months,” Citi analysts said in a research report on Friday.

The HFCAA, which took effect in December 2020, prevents companies that refuse to open their books to US accounting regulators from trading on US stock exchanges.

The law applies to any foreign company, but the focus on China is obvious. Beijing has often resisted such scrutiny in the past. It requires companies that are listed overseas to hold their audit documents in mainland China, where they cannot be reviewed by foreign agencies.

The names cited by the SEC on Thursday are fast food company Yum China Holdings, technology company ACM Research, biotech group BeiGene, Zai Lab, as well as pharmaceutical company Hutchmed.

They are the first of about 270 Chinese companies that could be delisted from the New York Stock Exchange or the Nasdaq for failing to comply with the rules.

China’s Securities Regulatory Commission on Friday responded to the U.S. move and said it was confident it would reach an agreement with its U.S. counterparts on securities supervision. Talks between the CSRC, China’s Ministry of Finance and the US Public Company Accounting Oversight Board have made “positive progress”, the CSRC said in a statement.

The SEC’s decision triggered a sell-off in Chinese stocks in the United States on Thursday.

The Nasdaq Golden Dragon China Index, a popular index that tracks more than 90 Chinese companies listed in the United States, fell 10% on Thursday, the worst daily drop since October 2008.

yum china (YUMC)which owns the KFC and Taco Bell brands in China, fell 11%. MCA Research (CCMR) plunged 22%. Zai Laboratory (ZLAB)Hutchmed and BeiGene (BNE) decreased by 9%, 6.5% and 6% respectively.

On Friday in Hong Kong, Yum China lost 12%, while BeiGene lost 8.3%.

The reference of the city Hang Seng Index (HSI) fell more than 3% on Friday, mainly on investor concerns over a protracted war in Ukraine after peace talks between Ukraine and Russia stalled. from Japan Nikki 225 (N225) fell 2.5%, China Shanghai composite (SHCOMP)fell 1.7%, and Korea Kospi (KOSPI) was down 1%.

US stock futures also fell, with Dow futures falling 120 points, or 0.4%. S&P 500 and Nasdaq futures fell 0.5% and 0.7% respectively.

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