Odds of Chinese-listed U.S. stocks being delisted from U.S. exchange falls
Over 200+ Chinese companies that trade on U.S. stock exchanges are at risk of being delisted — notably some of China’s most well-known companies like Alibaba, Baidu and Pinduoduo.
Delisting fears have been a pain point for many global investors — on top of the many risks in the Chinese economy. But last Friday, the U.S. and China came to an agreement that could prevent that scenario.
What happened? TLDR:
- In recent years, international investors have been burned by several fraudulent cases involving Chinese companies (blame it on lack of audit access).
- In 2020, a U.S. law passed that let the U.S. delist foreign companies if U.S. auditors can’t review foreign audits for three straight years.
The agreement between the U.S. and China allows U.S. inspectors to travel to China for audit inspections.
According to Goldman, it’s a “regulatory breakthrough” but warned that there’s still lots of uncertainty — giving two predictions (Bloomberg):
- Delisting scenario: U.S.-listed Chinese stocks could fall by 13%.
- No-delisting scenario: U.S.-listed Chinese stocks could rise by 11%.
Goldman pegged the chance of Chinese companies being delisted at 50% — down from 95% in March. Still, the agreement is only a “first step,” and it’s uncertain what level of access U.S. auditors will have.