Analysis: More U.S.-listed Chinese firms seen seeking backup listings as new audit law looms

Reuters ^ | December 3, 2020 | By Scott Murdoch, Kane Wu

[Oldeconomybuyer]

HONG KONG - The rush by U.S-listed Chinese companies to secure a secondary listing in Hong Kong or China is only set to intensify as the United States readies a new law allowing it to kick firms off its exchanges if they do not comply with U.S. auditing rules.

The “Holding Foreign Companies Accountable Act” is expected soon to be signed into law by U.S. President Donald Trump after it was passed by the U.S. House of Representatives on Wednesday. It stipulates that failure to comply with the U.S. Public Accounting Oversight Board’s audits for three years in a row will mean a U.S. delisting.

While it applies to companies from any country, the legislation’s sponsors intended it to target Chinese firms.

Authorities in China have long been reluctant to let overseas regulators inspect local accounting firms, citing national security concerns. If they do not bend, there may be little the companies themselves can do to prevent a delisting.

“The passage through the House will mean that wave of secondary offerings will continue as China is unlikely to make a concession on the accounting access front,” said Aequitas Research partner Sumeet Singh, who publishes on Smartkarma.

“Even if it does make a concession, it will probably do so at the last minute, in year three, and hence most companies will have already hedged their bets by then with a secondary offering in Hong Kong.”

[Oldeconomybuyer]

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