China Tech Stocks Drop for Second Day Amid U.S. Delisting Risks
(Bloomberg) -- Chinese technology stocks fell for a second day amid continued concern about the risk of local firms getting kicked off American exchanges.
The Hang Seng Tech Index, which tracks some of the biggest Chinese firms in the sector, closed down 0.7% Friday, having earlier lost as much as 3.9%. It fell 1.4% on Thursday after the U.S. securities regulator played down the prospect of an imminent deal to keep Chinese companies listed there.
Baidu Inc., which was added to the list of firms facing possible delisting, slumped 4.5% as the worst performer on the tech gauge.
“A solution between the U.S. and China regulators may not be as near as previously hoped,” said Marvin Chen, an analyst at Bloomberg Intelligence. “Markets may have gotten ahead of themselves over the past two weeks.”
The two-day selloff in tech names shows that investors remain on edge amid a long-standing dispute over whether American regulators can get full access to U.S.-traded Chinese company audits. In response to comments by the Securities and Exchange Commission chair tamping down speculation that a deal to avoid delistings is near, China said talks with the U.S. accounting watchdog will continue.
Having lost about a third of its value last year amid Beijing's relentless crackdown on the sector, the Hang Seng Tech Index has plunged another 20% so far in 2022 as investors remained concerned about further regulatory action. Beijing is preparing new regulations on the live-streaming industry including a daily cap on tipping, the Wall Street Journal reported on Wednesday. Later that afternoon, China's regulators pledged to eradicate crimes including tax evasion on such platforms.
The Hang Seng Index gained 0.2% on Friday, having earlier slid as much as 2% as dozens of firms had trading halted after missing a deadline to publish annual results. China's CSI 300 Index gained 1.3%, led by an advance in consumer shares.
Read: CSI 300 Rises to Two-Week High as Consumer Shares Gain
“My gut feeling is that there is a strong chance that they (American Depositary Receipts) will get delisted in a few years. I know both the regulators are working but I think there's a reasonable chance in the future,” said Sean Taylor, Asia-Pacific chief investment officer at DWS, adding that they are still happy to hold ADRs provided there's another listing elsewhere.
READ: Chinese ADRs Off to Worst Start Since 2008 on Delisting Threat
©2022 Bloomberg L.P.
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