Given this, it is likely that Hong Kong will stand to benefit and the report notes that the international financial centre is becoming better equipped for such challenges: “We find the Hong Kong market is becoming a more attractive listing destination for Chinese companies, a major venue for Chinese ADRs’ homecoming, an international bourse with higher mainland participation, and a top-heavy and ‘polarised’ market providing diversified investment products.” Yet, the landscape for Chinese equities as well as China’s regulatory framework could undergo dramatic change,” the report from the research team at China Renaissance stated. After any clarification of the rules, eligible Chinese companies should still be able to be listed in the US, in our opinion. We expect this will dampen investor sentiment, potentially depress valuations for IPOs in the US and make it more difficult for Chinese companies to raise funds overseas. “The new rules may impose long waiting periods on companies hoping to list abroad. “Recently, various regulatory agencies in China have also begun to scrutinise companies in internet and technology-related sectors on a range of issues, including but not limited to data security, consumer privacy, anti-competitive practices and merger irregularities,” a recent research report by China Renaissance stated.įor Chinese companies considering an IPO in the United States, notes the China Renaissance report, they will have to wait for clarification and may be subject to scrutiny and pre-approval from a number of Chinese regulatory agencies. As well as protecting sensitive data and boosting cybersecurity, further rules are expected. The action by the cybersecurity regulator forms part of a broader move by Beijing to tighten the rules on companies listing overseas. According to data from Refinitiv, there are an additional 17 Chinese companies that had plans to list in the United States this year. The move has forced a number of Chinese companies to rethink their overseas IPO plans, with reports of at least five companies - Ximalaya, LinkDoc Technology, Soulgate, Hello and Keep - abandoning their overseas listing. Since the move to restrict Didi, regulators said they were also investigating recruitment app Boss Zhipin and freight platform Full Truck Alliance, which are also listed in the United States. The Cybersecurity Administration of China took issue with Didi’s use of data, as it becomes increasingly concerned with national information security and how data is managed across borders by companies that are listed in foreign countries. It has also dampened the enthusiasm for other Chinese companies seeking to list - for fear of the implications of regulatory action they may also be subjected to. Although existing users can still use the app, being unable to acquire new customers hardly inspires confidence among investors. That mood soon soured, however, when two days later when China’s cybersecurity regulator took action that forced the company to remove its app from app stores. When the ride-hailing app Didi raised US$4.4bn on the New York Stock Exchange at the end of June, it pointed to the benefits of Chinese companies listing overseas, and the buoyant market for initial public offerings.
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