Chinese e-commerce giant Alibaba was certainly one of greater than 100 companies that faced delisting from the U.S. stock exchange in 2024 if their audit information was not shared with PCAOB inspectors.
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According to one investment manager, investors could regain the confidence to put their money in Chinese tech stocks as these companies avoid delisting from U.S. stock exchanges and the Chinese government pledges political support.
This was said last week by the U.S. accounting watchdog, the Public Companies Accounting Oversight Board gained full access to inspect and investigate Chinese companies for the first time after China finally granted access to the United States in August.
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Greater than 100 Chinese tech companies such as Alibaba, Baidu and JD.com faced the risk of being recalled in the US in 2024 if their inspection information was not shared with PCAOB inspectors.
Investors often struggle with the lack of transparency in Chinese stocks.
“This may allow institutional investors to come back. Skilled investors were very afraid of this delisting risk, which is why they stayed on the sidelines,” said Brendan Ahern, chief investment officer, on Wednesday.
As of September 30, there have been 262 Chinese companies listed on US stock exchanges with a combined market capitalization of $775 billion, according to the US-China Economic and Security Review Commission.
“As that risk goes away based on the PCAOB announcement, you will see investment dollars go back to those names,” Ahern said.
“These web giants are really where investors want to invest in China,” Ahern said.
But he also stipulated that it’s still “early days, weeks, months to see capital moving back into space.”
But he also noted that political support will help speed up the growth of those companies. Last week, China pledged to increase domestic consumption next yr as the country moves towards accelerating growth after exiting its COVID-19 zero-mile policy.
“2023 is the yr we may have a variety of government policy support, such as increasing domestic consumption,” Ahern said. “About 25% of all retail sales undergo businesses.”
“The Chinese government actually needs these web companies, which explains why now we have witnessed rollbacks from a few of the regulatory controls we experienced in 2021.” Ahern said.