Chinese tech stocks fall as U.S. SEC begins rollout of law aimed at delisting

Shares in dual-listed Chinese companies fell sharply on Thursday in Asia after the U.S. securities regulator adopted measures that would kick foreign companies off American stock exchanges if they do not comply with U.S. auditing standards. The move by the Securities and Exchange Commission (SEC) adds to the ongoing and unprecedented regulatory crackdown in China on domestic technology companies, citing concerns that they have built market power that stifles competition.

The Holding Foreign Companies Accountable Act, signed into law by then-President Donald Trump in December, is aimed at removing Chinese companies from U.S. exchanges if they fail to comply with American auditing standards for three years in a row. The rules also require firms prove to the SEC they are not owned or controlled by an entity of a foreign government and to name any board members who are Chinese Communist Party officials, the SEC said in a statement Wednesday.

In Hong Kong, the news prompted a sharp sell-off of the U.S.-listed Chinese companies which have listed on the city’s exchange in the past two years. Baidu shares — which debuted Tuesday — dropped 10.45% in early Thursday trade, Alibaba Group Holding Ltd slipped 5.3%, JD.Com Inc fell 5% and Netease Inc was down 4.1%. The falls outpaced a 0.2% decline in the broader Hong Kong Hang Seng Index and a 2.22% fall in the Hang Seng Tech Index.

“A lot of investors thought the U.S. and the Biden administration would be more amicable towards China and things would be easier, but this news shows that it is going to be just as tough,” Wealthy Securities managing director Louis Tse said. DailyFX strategist Margaret Yang said the Chinese-listed stocks were also under pressure after it was reported that China was considering creating a state-backed joint venture with domestic tech firms to oversee user date.

Chinese tech stocks fall as U.S. SEC begins rollout of law aimed at delisting, CNBC, Mar 25