Chinese companies are preparing to leave “Wall Street” … what is their next destination?

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Source: Dubai – Mr. Muhammad

With tension escalating between Beijing and Washington over the background of the Corona crisis and the trade war between the two countries nearly two years ago, Chinese companies listed on Wall Street face the risk of exiting the American money market, which made many of them think about their next destination.

And a report published by the “Financial Times” newspaper that many of these companies are already thinking about heading towards the financial market in Hong Kong, which could herald a wave of primary and secondary offerings in one of the largest financial markets in Asia during the coming period.

The administration of US President Donald Trump is taking further escalatory steps since the beginning of this year against Chinese companies listed on Wall Street, with a proposal for new legislation to write off companies that do not comply with American accounting standards at a time when Trump announced investigations into the inclusion of a group of entities Chinese listed on “Wall Street”.

At stake

In a report by the China Investment Bank, “China Renaissance”, the bank estimated that Chinese companies with a market value of about one trillion dollars face the specter of leaving Wall Street if the US Congress passes the new legislation requiring Chinese companies to adhere to American accounting standards.

The report said that many of those companies, such as “Baidu” and “Penddu”, are already thinking about their next step once they get out of “Wall Street”.

Late last year, Nasdaq began cracking down on the initial public offerings of small Chinese companies by tightening restrictions and slowing the pace of the offering, according to the Wall Street Journal, citing regulatory documents seen by the newspaper.

An estimated 156 Chinese companies are listed on the US stock exchanges, with a market value of about $ 1.2 trillion.

Offering features

The Financial Times report says that Chinese companies are mainly seeking to put on the American money market to obtain dollar financing that they can not get on the mainland as the government tightens restrictions on foreign capital.

The newspaper report adds that Chinese companies use their listing on the American stock exchanges as another guarantee to obtain domestic financing easily from local lenders in China.

Among the other reasons that make the US markets the preferred destination for the offering are the restrictions imposed by the local authorities in Beijing, which impose strict criteria for entering the money market, among which are not limited to the inability of companies that make successive losses to enter the money market.

Chinese companies raised about $ 70 billion in initial offerings on the US money market from 2000 to the end of last year.

The new destination

In the latest sign of Chinese companies heading towards their new destination, “Hong Kong”, the Financial Times quoted sources as saying that the Chinese “Yam” application, the operator of food brands Pizza Hut and Kentucky, in China, is about to collect about $ 2 billion from a secondary offering on the Bursa. Hong Kong.

The newspaper report pointed out that a number of other Chinese companies have moved over the past few weeks towards the “Hong Kong” Stock Exchange similar to the electronic games company “NetEase”, which collected about 3 billion dollars.

While trading began on the shares of “JD.com” e-commerce company already on the Hong Kong Stock Exchange last Thursday after the company succeeded in raising about 4 billion dollars from investment institutions.





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