Logo of Baidu Inc. is displayed at the company’s headquarters on July 3, 2019 in Beijing, China.
Wan Xiaojun | Visual China Group via Getty Images
Some analysts remain pessimistic about US-listed Chinese stocks, warning the path forward remains uncertain although signs of delisting risks may fade.
“Global investors may be jumping the gun a bit. Everything is very, very soon,” said Shehzad Qazi, chief executive officer of China Beige Book International.
March was a volatile month for Chinese stocks, which one has dived? then skyrocket like Beijing signal more support for overseas-listed companies.
The MSCI China Index is up nearly 24% on the month, hovering around a 25% decline in the first half of the year. The index tracks all Chinese stocks, including those listed in Hong Kong, the Mainland and the United States. Its top components are mostly tech stocks. CNBC China ADR Indexwhich tracks US-listed Chinese stocks, has risen about 25% from mid-March to April 1.
“I have a feeling that a lot of investors are very happy with the progress right now but don’t really focus on the fact that there’s a lot of uncertainty out there, a lot of unknowns,” Qazi said. Squawk Box Asia” by CNBC on Monday.
Harvey Pitt, who served as chairman of the US Securities and Exchange Commission from 2001 to 2003, added: “This is clearly an attempt by the Chinese government to create an appearance that will have more transparency. The real demon will be in the details.” “
“The only question will be: are people currently investing in Chinese companies open to doing the same?” asked Pitt, now CEO of consulting firm Kalorama Partners.
In early March, shares of Chinese companies came under pressure as the US Securities and Exchange Commission began identifying Chinese companies. may be delisted if they do not comply with the audit requirements. Those people include tech giants Baidubiopharmaceutical company BeiGene and fast food restaurant business Chinese Yum.
On Friday, New York-listed Chinese stocks surged further after it was reported that China was considering granting US authorities full access to the company’s audits. This will allow those companies to continue to trade publicly in the US. The China Securities Regulatory Commission told CNBC it has asked several accounting firms consider preparing for joint inspections.
Over the weekend, Beijing also proposed amending privacy rules related to overseas listings, removing a legal barrier to cooperation between the two countries on audits, Reuters reported.
“Yes, there have been recent rule changes in China and they seem to suggest a positive step forward. But the truth is, at the end of the day, we don’t know the specifics of those companies,” said Qazi. company that the SEC will release. have the ability to audit under US rules and regulations.”
“So if the biggest players… Baidu, Alibaba, Tencent – will these companies make their books public for the US regulators to check? Because if they don’t, you’re taking away a bunch of market capitalization,” he added.
It’s too early to call it a ‘dragon market’
Other analysts also urged caution.
“Concrete policy actions to stabilize China’s real estate market will likely be required to sustain this market’s momentum. China’s zero-COVID policy and operational restrictions will also be required. will affect consumption and sentiment in the short term, while the country’s relationship with Russia means a threat to the United States, Seema Shah, chief strategist at Global Investments, said in a note. notes last week.
The asset debt crisis has stalked the Chinese economy. The Hong Kong exchange recently suspended trading in more than 30 stocks that failed to report earnings on time, including Chinese developers Sunac China, Shimao and Kaisa.
“While China may be continuing its market-friendly stance, it is still too early to call this a new dragon market race,” said Shah.
Kieran Tompkins of research firm Capital Economics added that the near-term growth outlook continues to deteriorate, with high oil prices, extended closings and other factors threatening earnings growth.
“Furthermore, even if domestic policymaking does not become less of a concern for investors, the war in Ukraine and China’s alliance with Russia have raised concerns that invasion will accelerate the decoupling of the country’s financial system from that of the United States,” the assistant economist said in an April 1 note.
“We therefore suspect that the Chinese equity market will continue to come under pressure, although its valuation relative to other MSCI equity indices is relatively low,” he added.
