Chinese Tech Shares Down, SEC Names First Firms to Face Audit Demands

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Chinese Tech Shares Down, SEC Names First Firms to Face Audit Demands

By Gina Lee

Investing.com – Chinese tech shares fell on Friday, alongside their U.S. counterparts, as fresh regulatory concerns added to an already volatile market. These concerns stem from the U.S. Securities and Exchange Commission (SEC)’s identification of five Chinese firms that could be subject to delisting if they failed to comply with certain auditing requirements.

The quintet is Beigene Ltd. (HK:6160), Yum China Holdings Inc. (HK:9987), Zai Lab Ltd. (HK:9688), ACM Research Shanghai Inc. (SS:688082)and Hutchmed China Ltd. (HK:0013) BeiGene’s Hong Kong shares were down 8.28% to HK$106.40 ($13.60) by 11:34 PM GMT (4:34 AM GMT). Yum China shares fell 12.15% to HK$335.40, while Zai Lab (NASDAQ:ZLAB) shares fell 13.24% to HK$253 and Hutchmed shares slid 14.97% to HK$24.70. ACM Research’s Chinese shares were down 9.16% to CNY$89.39 ($14.14).

In response to the SEC move, China Securities Regulatory Commission posted a note on its official WeChat page that said that together with the Ministry of Finance, it has continued to communicate with the U.S. Public Company Accounting Oversight Board and has made “positive progress.”

Although some analysts predict that the risks of delisting are unlikely to materialize in the near term, even the probability unnerved a market already dealing with the Chinese government’s year-long crackdown and the Russian invasion of Ukraine on Feb. 24.

The SEC update is “a reminder for the regulatory risks surrounding Chinese equities once again and the lack of positive catalysts overnight may potentially aggravate the downside move,” IG Asia Pte Ltd. market strategist Jun Rong Yeap told Bloomberg.

The Nasdaq Golden Dragon China Index that tracks Chinese shares listed in the U.S. tumbled 10% overnight, its biggest slide since October 2008. The index has slumped more than 60% since a February 2021 peak.

Meanwhile, China’s regulatory tightening for private enterprises has also seemingly intensified in recent weeks, even after food delivery platforms were asked to cut fees charged to restaurants. Authorities have also issued warnings about the risks in investing in products linked to the metaverse.

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