Five Chinese state-owned companies to delist from NYSE amid US tensions

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

The companies, which also include Aluminum Corporation of China (Chalco) (601600.SS), PetroChina (601857.SS) and a separate Sinopec entity, Sinopec Shanghai Petrochemical Co (600688.SS), each said they would seek the delisting from their US companies. Deposit actions this month.

The five, which were flagged in May by the US securities regulator as failing to meet its auditing standards, will retain their listings on the Hong Kong and mainland China markets.

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

Washington has long demanded full access to the books of Chinese companies listed in the United States, but Beijing bans foreign inspection of audit documents from local accounting firms, citing national security concerns.

There was no mention of the audit dispute in separate statements from the Chinese companies outlining their moves, which come amid heightened tensions following last week’s visit to Taiwan by US House Speaker Nancy Pelosi.

“These companies have strictly complied with the rules and regulatory requirements of the US capital market since their listing in the United States and have made the choice to delist for their own business considerations,” said the China Securities Regulatory Commission. (CSRC) in a press release.

The agency added that it would maintain “open communication with relevant overseas regulatory agencies.”

The oversight dispute, which has been simmering for more than a decade, came to a head in December when the Securities and Exchange Commission (SEC) finalized rules to potentially ban Chinese companies from trading under the Liability Act. foreign companies. He said 273 businesses were at risk.

Some of China’s biggest companies including Alibaba Group Holdings, JD.com Inc (9618.HK) and Baidu Inc are among them. Alibaba said last week it would convert its secondary listing in Hong Kong to a dual primary listing, which analysts said could ease the way for the Chinese e-commerce giant to change its primary listing venue in the future. coming. Read more

On Friday, U.S.-listed shares of China Life Insurance and oil giant Sinopec fell 3.06% and 3.26% respectively. Aluminum Corporation of China fell 3.14%, while PetroChina lost 2.85%. Sinopec Shanghai Petrochemical Co lost 3.54%.

A NYSE spokesperson declined to comment. A spokesperson for the Public Company Accounting Oversight Board, the SEC-supervised audit watchdog, did not immediately provide comment.

LOSE PATIENCE ?

Market watchers were divided on what the write-offs might mean for the audit deal, with some saying it was a bad sign.

“China is sending the message that its patience is running out in audit talks,” said Kai Zhan, senior counsel at Chinese law firm Yuanda, which specializes in U.S. capital markets.

The companies said their volume of shares traded in the United States was low compared to that of their other major listing places.

Still, U.S.-listed stock volume for the five companies on Friday was at least three times their 10-day average.

PetroChina said it has never raised follow-on capital from its U.S. listing and that its bases in Hong Kong and Shanghai “can meet the company’s fundraising requirements.”

Global fund managers holding U.S.-listed Chinese stocks are gradually turning to their Hong Kong-listed counterparts, though they still hope the audit dispute will eventually be resolved, Reuters reported this week. Read more

“These companies are very thinly traded with a very small U.S. market cap, so it’s not a loss for U.S. capital markets,” wrote Brendan Ahern, CIO of Krane Funds Advisors, which owns a New York-listed fund. focused on Chinese technologies. an email.

He and analysts said the write-offs could pave the way for China to comply with U.S. requirements because the five companies involved likely hold sensitive information that China wouldn’t want disclosed during an audit review.

“We view this as a positive sign. This aligns with our view that China will decide which companies would be allowed to list in the United States and therefore subject to SEC audit investigations,” Jefferies analysts wrote. in a note.

China Life and Chalco said they would file for delisting on Aug. 22, with the delisting taking effect 10 days later. Sinopec, whose full name is China Petroleum & Chemical Corporation, and PetroChina said their applications would be filed on August 29.

China Telecom (0728.HK), China Mobile (0941.HK) and China Unicom (0762.HK) were delisted from the US in 2021 after a Trump-era decision to restrict business investment Chinese technologies. That decision 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 by Michelle Price, Echo Wang and Chuck Mikolajczak Editing by David Goodman, Alexander Smith and Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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