(Yicai Global) May 21 -- The US Senate passed a bill yesterday to intensify oversight of foreign companies listed in the country, sending US-listed Chinese companies’ stock prices down.
Tech titan Alibaba Group Holding [NYSE:BABA] closed 0.19 percent lower and Pinduoduo [NASDAQ:PDD] dropped 3.47 percent, the Securities Times reported today.
The bill mandates that a foreign company will be barred from listing securities on US exchanges if it has not complied with the US Public Company Accounting Oversight Board’s audits for three straight years. It also requires listed companies to disclose whether they are owned or controlled by a foreign government. This means larger risks of delisting for US-listed Chinese companies, and that China’s state-backed firms will face obstacles seeking financing in the US.
Most Chinese stocks closed down yesterday even as US shares rose steeply across the board. The Dow Jones index climbed 1.52 percent to 24,575.9. The Nasdaq went up 2.08 percent to 9,357.78 and the S&P 500 index was up 1.67 percent at 2,971.61.
US-listed Chinese firms have found themselves buffeted by constant headwinds since this year.
Luckin Coffee admitted in an April 2 statement its chief operating officer was suspected of fabricating CNY2.2 billion (USD310 million) in sales, causing the firm’s stock price to plunge more than 85 percent before that day’s trading and triggering a circuit-breaker. Global market research agency Wolfpack Research released a report on April 7 saying that video website iQiyi had inflated the number of its users and revenue amounts and committed fraud before its initial public offering in 2018.
Muddy Waters Research released a short report on Chinese online education company GSX Techedu on May 18 claiming at least 80 percent of the firm’s users were bots, and charging that it fabricated 70 percent to 80 percent of its revenue.
The US Securities and Exchange Commission issued a statement on April 21 reminding US investors to pay attention to the risks of financial report quality and information disclosure when investing in companies with headquarters or major businesses in emerging markets.
The PCAOB has limited ability to inspect the audit books of Chinese companies listed in the US, the statement warned.
The Federal Retirement Thrift Investment Board will postpone its plan to adjust the portfolio of its international funds indefinitely, it said in the middle of this month. The original adjustment envisaged investment in some Chinese companies.
Editor: Ben Armour