As trade tensions between the world's two largest economies extend into the financial sector, investors are increasingly worried about Chinese companies potentially being delisted from U.S. exchanges. Under Biden's administration, auditing disputes have intensified delisting pressures on Chinese companies' American Depositary Receipts (ADRs), causing share prices to plummet.
Over a hundred Chinese companies, including tech giants Alibaba (BABA, Financial) and JD.com (JD), have listings in the U.S., with a combined market cap of about $1 trillion. Companies that haven't pursued a secondary listing, such as Pinduoduo (PDD) and Full Truck Alliance (YMM), are particularly vulnerable if forced to delist. Shifting listings to the Hong Kong Exchange could reduce liquidity and harm valuations. Furthermore, these companies face risks of divestment from U.S. government funds.
U.S. Treasury Secretary Janet Yellen indicated that the possibility of removing Chinese stocks from U.S. exchanges is under consideration. Hong Kong Financial Secretary Paul Chan stated that Hong Kong should be the primary option for Chinese ADRs considering a return. Morgan Stanley data shows that ADRs on the MSCI China Index have a daily trading volume of approximately $8.1 billion, about a quarter of Hong Kong's market.
