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Five Chinese state-owned companies are delisted from the NYSE amid US tensions

Five Chinese state-owned companies are delisted from the NYSE amid US tensions
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SHANGHAI/HONG KONG, Aug 12 (Reuters) – Five Chinese state-owned companies including oil giant Sinopec (600028.SS) and China Life Insurance (601628.SS)said Friday they would delist from the New York Stock Exchange amid economic and diplomatic tensions with the United States.

The companies, which include Aluminum Corporation of China (Chalco) (601600.SS)PetroChina (601857.SS) and Sinopec Shanghai Petrochemical Co (600688.SS)both said they would file this month to delist their American Depository Shares.

The five, flagged by the US Securities and Exchange Commission in May as failing to meet its auditing standards, will retain their listings in Hong Kong and mainland China.

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Beijing and Washington are in talks to resolve a long-standing audit dispute that could result in Chinese companies being delisted from US stock exchanges if they fail to comply with US regulations.

Washington has long demanded full access to the books of US-listed Chinese companies, but Beijing has banned foreign access to audit documents from local accounting firms, citing national security concerns.

Separate statements from the Chinese companies outlining their moves made no mention of the audit dispute, which came amid heightened tensions after US House Speaker Nancy Pelosi’s visit to Taiwan last week.

“These companies have strictly followed the rules and regulatory requirements of the US capital market since their listing in the US, and made the decision to delist based on their own business considerations,” the China Securities Regulatory Commission (CSRC) said in a statement.

The agency added that it will “keep communication open with relevant foreign regulators.”

The oversight dispute, which has been smoldering for more than a decade, came to a head in December when the Securities and Exchange Commission (SEC) passed rules potentially prohibiting trading with Chinese companies under the Holding Foreign Companies Accountable Act. It said 273 companies were at risk.

Among them are some of China’s largest companies, including Alibaba Group Holdings, JD Com Inc and Baidu Inc. Alibaba said last week it would convert its secondary Hong Kong listing to a dual primary listing, which analysts said paved the way for Chinese e-commerce -May make it easier for giants to switch primary listings in the future. Continue reading

In premarket trading on Friday, US-listed shares in China Life Insurance and oil giant Sinopec fell 5.7% and 4.3%, respectively. Aluminum Corporation of China lost 1.7% while PetroChina lost 4.3%. Sinopec Shanghai Petrochemical Co lost 4.1%.

A spokesman for the NYSE declined to comment. A spokesman for the Public Company Accounting Oversight Board, the audit regulator overseen by the SEC, did not immediately comment.

LOSE PATIENCE?

Market watchers were divided on what the delistings could mean for the audit deal, with some saying it bodes well.

“China is sending a message that its patience is waning in exam talks,” said Kai Zhan, senior counsel at Chinese law firm Yuanda, which specializes in US capital markets.

The companies said their US trading volume is small compared to their other major listings.

PetroChina said it has never raised follow-up capital from its US listing and its Hong Kong and Shanghai bases “can meet the company’s fundraising needs” and offer “better protection of investors’ interests.”

Global fund managers holding US-listed Chinese stocks are steadily shifting to their Hong Kong-traded peers even as they remain hopeful the audit dispute will eventually be settled, Reuters reported this week. Continue reading

“These companies are trading very thinly with very small US market caps so it’s not a loss for US capital markets,” wrote Brendan Ahern, CIO of Krane Funds Advisors, which has a New York-listed fund that focuses on Chinese Tech company focuses an email.

He and analysts said the delistings could pave the way for China to meet US requirements, as the five affected companies likely have sensitive information that China does not want to reveal in an audit.

“We see this as a positive sign. This is consistent with our view that China will decide which companies will be allowed to list in the US and thus be subject to SEC scrutiny,” Jefferies analysts wrote in a statement.

China Life and Chalco said they would file a delisting application on August 27. 22, which will come into force 10 days later. Sinopec, whose full name is China Petroleum & Chemical Corporation, and PetroChina said their applications would be accepted on April 27-29.

Chinese Telecom (0728.HK)China mobile device (0941.HK) and China Unicom (0762.HK) were scrapped from the United States in 2021 after a Trump-era decision to restrict investment in Chinese tech companies. That ruling was left unchanged by the Biden administration amid ongoing tensions.

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Reporting by Samuel Shen in Shanghai, Scott Murdoch in Hong Kong and Medha Singh in Bengaluru; additional reporting from Michelle Price and Echo Wang; Editing by Hugh Lawson, David Goodman and Alexander Smith

Our standards: The Thomson Reuters Trust Principles.

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