CHINA WATCHChinese Firms Leaving New York Stock Exchange Could Be First of Many
A long-running battle between U.S. securities regulators and Chinese companies that sell their shares in the United States is expected to result in five large state-controlled Chinese firms leaving the New York Stock Exchange, with other departures possible in the future.
A long-running battle between U.S. securities regulators and Chinese companies that sell their shares in the United States is expected to result in five large state-controlled Chinese firms leaving the New York Stock Exchange, with other departures possible in the future.
Last week, oil company Sinopec, China Life Insurance Company, Aluminum Corporation of China Limited, PetroChina, and Sinopec Shanghai Petrochemical announced that they would voluntarily delist from the NYSE.
The immediate effect for investors who have purchased shares of the five firms will be an exchange of what are known as American Depository Receipts, which trade in the U.S., for shares of the firms that trade in Hong Kong. But what it means for the larger number of investors who hold shares in the hundreds of Chinese firms listed on U.S. exchanges is less clear.
The departure of the five firms will leave only China Eastern Airlines and China Southern Airlines as major state-owned enterprises that remain listed in the U.S., raising questions about whether they will eventually delist, as well.
Other Departures Possible
Some other large Chinese firms have either already delisted or appear to be making plans to do so. Didi, the Beijing-based ride-hailing company, delisted under pressure from the Chinese government earlier this year. This week, fast food giant Yum China Holdings announced it is converting its current secondary share listings in Hong Kong to a primary listing, which would make delisting simpler. E-commerce giant Alibaba took the same step last month.
In a recent interview with CNBC, former NYSE President Tom Farley said that from an economic perspective, the departure of the five Chinese government-owned firms is “a non-event.” The companies do not trade widely in the U.S., he said.
However, he added, “Symbolically, it’s very important,” because it opens the door to the departure of large Chinese companies like Alibaba and JD.com, which do trade heavily in the U.S.
“This is China saying, ‘Hey, these are gone, and the next batch to go are the Alibabas and the JD.coms.’ That would be a big deal both economically and symbolically,” Farley said.
Alibaba’s market capitalization, the cumulative value of its outstanding shares, is over $232 billion. JD.com, another e-commerce firm, has a market capitalization of more than $87 billion.
