‘Delisting of Chinese firms to hit investor confidence’

Experts say move will have limited impact on Chinese investments

BEIJING: If measures reportedly being considered by US officials to delist Chinese equities from exchanges in the United States were to take effect, they would likely have a limited impact on Chinese investments but would deal a heavy blow to investor confidence in financial markets in the US, experts said.

The US government is not contemplating blocking Chinese companies from listing shares in the US “at this time”, US Treasury spokeswoman Monica Crowley told Bloomberg over the weekend, in response to media reports that Washington is considering removing Chinese companies from US stock exchanges.

The reports came as Chinese Vice-Premier Liu He is about to lead China’s negotiating group to the 13th round of China-US high-level economic and trade consultations.

The meeting will be held in Washington in the week after the National Day holiday, which ends on October 7, the Ministry of Commerce said on Sunday. Nasdaq Asia-Pacific Chairman Bob McCooey, while speaking to Sina Weibo on Sunday, said that the US exchange, where many Chinese technology firms such as Baidu and JD.com are listed, will always “be supportive of Chinese issuers” as part of its commitment to providing non-discriminatory access to all eligible companies.

The possibility of such measures being imposed in the future could not be ruled out, despite the denial by the US Treasury, because of the US administration’s earlier swings in the protracted trade dispute with China, said Beijing-based University of International Business and Economics Finance Professor Xue Yi.

“But such measures, if taken, would have only limited impact on Chinese firms and markets. I don’t think it would make any economic sense for the US side,” Xue added. Chinese companies listed in the US - which are outstanding performers in the country’s fast-growing economy - would be welcomed by other bourses if they were forced to delist from US exchanges, Xue said.

“They may choose to relist on Shanghai’s newly launched sci-tech innovation board, called the Star Market, where they may raise more money than in the US, as domestic investors are generally more enthusiastic about their prospects. This would be a good chance for the Star Market to jazz up its global influence,” Xue said.

Delisting of Chinese firms would not only create barriers for the US investors seeking to optimise their portfolios but would also drastically undermine the reputation of the US as a champion of a free and open financial market, Xue stated. “If the US stock exchanges excluded Chinese companies, it would mean the exchanges could also exclude companies from other economies,” he said, which would divert them from the US.

Bloomberg also reported on Friday that the US administration is considering blocking US government pension funds from investing in the Chinese market, as well as placing investment limits on Chinese companies included in stock indices managed by US firms.

The report rattled US investors ahead of the resumption of trade talks between the world’s two largest economies. The S&P 500 Index started to plunge after the report and ended 0.53% lower at 2,961.79 on Friday.

This article originally appeared on the China Economic Net 

Published in The Express Tribune, October 1^st, 2019.

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