Yum China Holdings
(PDD) were among the Chinese stocks that got hammered into US trading Thursday after the US Securities and Exchange Commission put forward a list of five companies that could be delisted if they do not measure up to US accounting standards.
The list was a first step in applying the Holding Foreign Companies Accountable Act, which became law on Dec. 18, 2020. The act requires foreign companies to make documents available for accounting purposes and delist them if they can not meet the requirements. The preliminary list of five companies includes
(HCM), Yum China, and ACM.
Not surprisingly, BeiGene declined 5.9%, Hutchmed fell 6.5%, Zai Lab dropped 9%, Yum China slumped 11%, and ACM tumbled 22%.
But Chinese ADRs that were not named also fell, including Alibaba, which dropped 7.9%, Baidu, which declined 6.3%,
(NIO), which slumped 12%, and Pinduoduo, which tumbled 17%.
Citigroup analyst Alicia Yap contends the market is overreacting. “We maintain our view that the SEC update is not new news and any real risk of ADRs de-listing will likely materialize by 2024-2025 when companies fail to disclose the requirement mandated by the SEC for three consecutive years,” she writes.
In July 2021, Barron’s warned that Chinese stocks listed in the US could face delisting over accounting issues.
Write to Ben Levisohn at email@example.com