What's happened
As tensions rise between the US and China, the risk of delisting Chinese companies from US exchanges is increasing. US Treasury Secretary Scott Bessent has indicated that delisting options are back on the table, potentially impacting $1.1 trillion in market capitalization for Chinese firms. Hong Kong may benefit as companies consider secondary listings.
What's behind the headline?
Implications of Delisting Risks
- Market Impact: The potential delisting of Chinese companies could trigger a massive sell-off, estimated at $2.5 trillion, affecting both US and Chinese markets.
- Investor Sentiment: Retail investors, holding approximately $370 billion in ADRs, may face significant losses if forced to divest.
- Hong Kong's Position: As US-listed Chinese firms consider dual-primary or secondary listings, Hong Kong's IPO market could see a resurgence, positioning it as a preferred venue for capital raising.
- Future Outlook: If delisting occurs, it may lead to a more fragmented financial landscape, with Chinese companies increasingly reliant on Hong Kong for funding and investor access.
What the papers say
According to the South China Morning Post, US Treasury Secretary Scott Bessent stated that 'everything's on the table' regarding delisting options, highlighting the seriousness of the situation. Goldman Sachs analysts noted that a financial decoupling could lead to a staggering $2.5 trillion sell-off in stocks and bonds, emphasizing the potential fallout for both economies. Meanwhile, the South China Morning Post also reported that Hong Kong's IPO market remains attractive, with companies like Muyuan Foods planning listings despite the volatility caused by the trade war.
How we got here
The US-China trade conflict has intensified, leading to renewed fears of delisting Chinese companies trading as American Depositary Receipts (ADRs). This follows previous tensions over auditing standards and compliance issues, which had previously prompted many firms to seek secondary listings in Hong Kong.
Go deeper
- What are the implications for US investors?
- How might Hong Kong's market change?
- What companies are most at risk of delisting?
Common question
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What are the latest developments in the US-China trade war?
The US-China trade war has seen significant escalations recently, with tariffs impacting both nations and the global economy. As tensions rise, many are left wondering how these developments will affect trade relations, investments, and the broader market landscape. Below are some common questions and answers regarding the current state of the trade war.
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What are the risks of delisting for Chinese ADRs?
As tensions between the US and China escalate, the risks associated with Chinese companies trading as American Depositary Receipts (ADRs) are becoming a pressing concern for investors. With significant investments at stake, understanding these risks is crucial for anyone holding or considering ADRs.
More on these topics
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The United States of America, commonly known as the United States or America, is a country mostly located in central North America, between Canada and Mexico.
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China, officially the People's Republic of China, is a country in East Asia. It is the world's most populous country, with a population of around 1.4 billion in 2019.
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Hong Kong, officially the Hong Kong Special Administrative Region of the People's Republic of China, is a metropolitan area and special administrative region of the People's Republic of China on the eastern Pearl River Delta of the South China Sea.
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Alibaba Group Holding Limited is a Chinese multinational technology company specializing in e-commerce, retail, Internet, and technology.
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The Goldman Sachs Group, Inc., is an American multinational investment bank and financial services company headquartered in New York City.
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Hong Kong Exchanges and Clearing Limited (HKEX; Chinese: 香港交易及結算所有限公司; pinyin: Xiānggǎng jiāoyì jí jiésuàn suǒyǒu xiàn gōngsī) operates a range of equity, commodity, fixed income and currency markets through its wholly