China is cracking down on stocks that trade on U.S. exchanges. Here’s what it means if you hold them
China’s most powerful companies — including Didi, Alibaba and Tencent — are suddenly under immense scrutiny as country vows to crack down on domestic companies that list on U.S. exchanges. That move could upend a $2 trillion market loved by some of the biggest American investors.
Beijing is stepping up its oversight on the flood of Chinese listings in the U.S., which are overwhelmingly tech companies. The State Council said in a statement Tuesday that the rules of “the overseas listing system for domestic enterprises” will be updated, while it will also tighten restrictions on cross-border data flows and security.
The crackdown on tech is not a new trend. But because the nation has the ability to move quickly, any action could wreak havoc in major areas on Wall Street. Market analysts say it could not only threaten the IPOs in the pipeline, but it could also pressure the popular Chinese ADR market.
“U.S. investors will have to weigh the risks of owning ADRs at a time when tensions between Beijing and Washington remain elevated while all global investors will have to balance the allure of China’s vast addressable market with the possibility that officials may reshape company prospects at the stroke of a pen via the imposition of regulatory strictures,” BCA Research chief global strategist Peter Berezin said in a note Wednesday.
Reference: CNBC
Read More: https://www.cnbc.com/2021/07/
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