US-listed Chinese mainland firms rise amid hopes of audit cooperation

Despite the US Securities and Exchange Commission continues to target US-listed Chinese mainland companies, equity investors' interest in these companies' stocks as well as in the overall Chinese mainland stock market has not been affected much, as shown by their latest share prices, market insiders said on Thursday.

On Wednesday, the SEC identified as many as 88 US-listed Chinese mainland companies, including e-tailer JD, video-sharing platform Bilibili and online travel agency Trip, for what it said was their failure to meet the audit requirements under the Holding Foreign Companies Accountable Act.

While the Nasdaq closed up 3.19 percent on Wednesday, the Nasdaq Golden Dragon China Index, which tracks US-listed Chinese mainland companies, also climbed 2.24 percent. JD closed 1.62 percent higher on Wednesday and Bilibili rose 2.91 percent.

In Hong Kong on Thursday, JD rose 1.09 percent and Bilibili climbed 0.85 percent, while the benchmark Hang Seng Index shed 0.29 percent.

JD said in an announcement on Thursday that companies will be removed from the US stock exchanges only if they are found to have not met the US regulator's audit requirements for three consecutive years. The company said it will seek all possible solutions to maintain its dual listing status on both Nasdaq and the Hong Kong stock exchange.

The 88 names identified on Wednesday constitute the sixth batch of the US-listed Chinese mainland companies included in the SEC "provisional list" this year, indicating that they have to produce solid evidence disproving the SEC's allegations before May 25. Otherwise, they will be included in the "conclusive list", a precursor to eventual delisting.

Restaurant chain Yum China and technology giant Baidu Inc are among the prominent names in the conclusive list and will be delisted from the US exchanges in early 2024.

Foreign Ministry spokesman Zhao Lijian said during a news conference on Thursday that Chinese and US securities regulators have communicated over the identification. The process does not automatically mean the companies concerned will be delisted. Whether the companies get delisted or remain listed will be determined by the Chinese and US regulators' audit cooperation, he stressed.

The China Securities Regulatory Commission said in a notice on Wednesday that efforts will be made to launch supervisory mechanisms over Chinese mainland companies' overseas listings. There should be more research and predictions about the risks latent in cross-border markets, it said.

The Chinese mainland market should be better linked with overseas markets, with cooperation with the Hong Kong capital market to be strengthened, said the country's top securities watchdog.

Meanwhile, the A-share market staged a mixed performance on Thursday. The benchmark Shanghai Composite Index climbed 0.68 percent and the Shenzhen Component Index rose 0.23 percent; but, the tech-heavy ChiNext in Shenzhen slid 1.33 percent.

A-share pharmaceutical companies reported the strongest daily increase of 4.2 percent on Thursday, mainly driven by the 4.47 percent average rally by companies specializing in nucleic acid tests. Buoyed by the relaxed home purchase policies announced by a number of lower-tier cities during the Labor Day holiday, A-share property developers saw their prices rise 1.02 percent on average on Thursday.

Meng Lei, China strategist at UBS Securities, said valuations in the A-share market are quite low now. Fluctuations will mark the second quarter, to be followed by a substantial rebound in the third quarter, he said.

Infrastructure will drive growth this year, with the overall annual growth rate expected at 8 percent. Investors should also look for opportunities in power battery, new energy, renewable energy and photovoltaic companies, Meng said.