Fears of Chinese companies being delisted from U.S. exchanges were somewhat assuaged when Beijing announced that it was prepared to make a concession on disclosing Chinese audit information to U.S. regulators. This concession came after the U.S. Securities and Exchange Commission threatened to delist some Chinese companies from U.S. exchanges.
Financial regulators in Beijing are finalizing plans which will clarify a law preventing foreign regulators from conducting investigations within China. The plans could allow some Chinese companies listed on U.S. exchanges to provide some audit information to U.S. accounting regulators, according to a report from the Financial Times.
Beijing has barred foreign regulators to access the documents of Chinese companies. But the U.S. Holding Foreign Companies Accountable Act demands that the U.S. Public Company Accounting Oversight Board have access to the audits of Chinese and Hong Kong firms. The standoff came to a head last week when the SEC gave five Chinese companies an ultimatum: comply with audit requests within three years or be delisted from New York exchanges.
Kevin T. Carter, founder and CEO of the Emerging Markets Internet & Ecommerce ETF (NYSEArca: EMQQ) and the Next Frontier Internet & Ecommerce ETF (FMQQ), assured investors during a recent briefing video that “there is no immediate delisting threat.”
For one thing, the SEC and China Securities Regulatory Commission have two years to work out a deal. “They’re willing to make major concessions,” Carter said. And even if the SEC and CSRC are unable to reach a deal within that time, Carter noted that any holdings of Chinese stocks “can be transferred quite easily” to the Hong Kong Exchange.
“This is a cosmetic change,” he added about a possible exchange transfer.
EMQQ’s largest country exposure is China at roughly half the fund’s weight.
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