The China Securities Regulatory Commission and the US Public Company Accounting Oversight Board announced on Friday that both sides have signed an agreement to cooperate on the examination of the audit work papers of companies. China listed in the United States. Pictured here is the CSRC building in Beijing in 2020.
Emmanuel Wong | Getty Images News | beautiful pictures
BEIJING – The risk of Chinese stocks delisting from US exchanges has nearly halved after regulators reached an audit agreement, Goldman Sachs analysts said in a note. report on Monday.
The China Securities Regulatory Commission and American Public Company Accounting Oversight Board announced Friday that both sides have signed an agreement to cooperate on examining the audit work papers of Chinese companies listed in the United States. The Chinese Ministry of Finance also signed the agreement.
“This is definitely a regulatory breakthrough,” said Kinger Lau of Goldman Sachs and a team, warning that there is still a lot of uncertainty.
They pointed out that the PCAOB said the agreement was only the first step, while the Chinese side said it would provide support” in inspections.
PCAOB said it planned to have inspectors in China in mid-September and make a decision in December on whether China will still hinder access to audit information.
Goldman Sachs analysts said on Monday their modeling “suggests the market may be pricing in about a 50% probability” that Chinese companies could be delisted from the US.
This is down from 95% in mid-March – the highest level recorded since January 2020.
At the end of 2020, the United States Foreign Companies Accountability Act has become law. It allows the US Securities and Exchange Commission to remove Chinese companies from US exchanges if US regulators are unable to review audits of companies for three consecutive years. next.
Since March, the SEC has started calling Alibaba and other US specific listed Chinese stocks for not complying with the new law.
China stock outlook
Goldman Sachs analysts estimate that if Chinese stocks listed in the US, known as American depository papers, are forced to delist, shares could drop 13%.
The report said that MSCI China could fall by 6% under such a scenario. The index’s top holdings are Chinese stocks that are listed primarily in Hong Kong, such as Tencent and Alibaba.
A “no delisting” scenario could make China ADR and MSCI 11% and 5% higher, respectively, the report said.
Few China-based companies have listed in the US after Beijing oversaw the IPO of Chinese ride-hailing company Didi at the end of June 2021. Regulators have since tightened restrictions restrictions on Chinese companies – especially those with at least 1 million users – want to list abroad.
Recent actions of CSRC
