U.S. Listed Chinese Tech Stocks Drop Over Regulatory Concerns: FT

Hong Kong’s Hang Seng Tech index plummeted 5% on growing concerns of U.S. delisting and Beijing’s user data possession, Financial Times, reports.

• The Hong Kong-listed shares of Alibaba Group Holding Ltd BABA, Tencent Holdings Ltd TCEHY, and Baidu Inc BIDU dropped 4.2%, 2.3%, and 9%, respectively.
• The meltdown was triggered by the SEC’s announcement regarding steps to force the U.S.-listed foreign companies to provide access to financial audits or risk forcible delisting after three years of non-compliance. Beijing had long denied U.S. regulators access to Chinese companies’ books.
• Bloomberg’s report regarding the Chinese government’s proposed joint venture for the supervision of user data harvested by the country’s tech companies is another potent cause behind the meltdown as per analysts.
• Another factor for the drop is the global shift in investor attention from high-growth companies to cheaper, unloved stocks expected to benefit from the pandemic recovery.
• China discouraged its companies from any audit disclosure over national security concerns.
• The delisting threats failed to discourage Chinese tech group IPOs (initial public offering) on Wall Street, which rose at an average of 22% on the first trading day. The companies raised around $1.3 billion from the U.S. in 2021. The Wall Street investment banks also remain keen on the IPOs, considering the fee revenue.
• Price action: BABA shares traded lower by 2.33% at $224.24, and BIDU shares traded lower by 6.89% at $222.72 in the premarket session on the last check Thursday. TCEHY shares traded higher by 1.76% at $78.16.