Prominent Chinese technology stocks have plunged as a US regulator designated five Chinese businesses that could be delisted from US stock exchanges for failing to fulfill audit criteria.
Yum China Holdings (YUMC), ACM Research (ACMR), biotech business BeiGene (BGNE), Zai Lab (ZLAB), and pharmaceutical company Hutchmed are among the companies named by the US Securities and Exchange Commission on Thursday per CNBC.
On the other hand, major tech stocks have dropped as investors fear that more businesses will be added to the US regulator's list.
Alibaba (BABA) plummeted more than 5% in Hong Kong on Friday. On Thursday, its stock on the New York Stock Exchange fell 7.9%.
After finishing 16 percent lower on Wall Street, JD.com (JD) fell 11% in Hong Kong. Following a 6.3 percent decrease in the United States, Baidu (BIDU) was down about 5%. Other corporations with dual listings in the US and Hong Kong have also suffered substantial losses.
Pressure Prompted Losses
The widespread losses occurred as Chinese businesses confronted increased regulatory pressure for both homes and the United States.
The SEC has cited five Chinese corporations so far this week for failing to comply with the Holding Foreign Companies Accountability Act (HFCAA), which grants the SEC the authority to force corporations off Wall Street if they refuse to allow US regulators to examine their financial audits for three years in a row, according to a CNN report.
Suppose American regulators are unable to evaluate corporate audits for three consecutive years. In that case, the SEC can restrict businesses from trading and delist them from US exchanges, according to the regulation which was passed in 2020.
The companies cited by the SEC on Thursday are the first among the roughly 270 Chinese firms that could get delisted from the New York Stock Exchange or the Nasdaq for not complying with the law. According to Citi analysts in a research report on Friday, there are "worries that more companies will be put on the [US] list in the coming months."
China is Willing To Work with The US
According to a report by Bloomberg, China's Securities Regulatory Commission of China has released a statement expressing willingness to collaborate with US regulators to conduct inspections. The agency also said that it acknowledges the measures to bolster the supervision of accounting companies. However, it disagrees with politicizing securities regulation.
On Thursday, the Nasdaq GoldeTn Dragon China Index, a popular index that measures more than 90 Chinese firms that are traded in the United States, plummeted 10%, the most since October 2008.
Yum China (YUMC), the Chinese company that owns the KFC and Taco Bell brands in China, fell 11% on Wall Street. The stock of ACM Research (ACMR) has dropped 22%. Zai Lab (ZLAB), Hutchmed (HUTC), and BeiGene (BGNE) all fell by 9%, 6.5 percent, and 6%, respectively. On Friday in Hong Kong, Yum China lost 6%, while BeiGene shed 5%.
On Friday, the city's benchmark Hang Seng Index (HSI) fell 1.6 percent, owing to investor concerns over a prolonged Ukraine conflict following the breakdown of peace talks between Ukraine and Russia. The Nikkei 225 (N225) in Japan sank 2.1 percent, while the Kospi (KOSPI) in Korea fell 0.7 percent. The Shanghai Composite (SHCOMP) in China, on the other hand, reversed previous losses and ended up 0.4 percent higher.
US stocks futures also declined as Dow futures down 50 points or 0.2%. S&P 500 and Nasdaq futures dropped 0.1% and 0.2% respectively.
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