Chinese e-commerce giant Alibaba was one of 100 companies that faced delisting in the US in 2024 if their audit information was not made available to PCAOB inspectors.
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Investors may be regaining confidence in Chinese technology stocks as those companies shy away from delisting from U.S. stock exchanges and the Chinese government promises political support, according to one investment manager.
Last week, the US accounting watchdog, the Public Company Accounting Oversight Board, said for the first time it was given full power to audit and investigate Chinese companies, after China finally allowed US access in August.
More than 100 Chinese tech companies such as Alibaba:, Baidu and: JD.com faced delisting in the US in 2024 if their audit information was not made available to PCAOB inspectors.
Investors are often faced with a lack of transparency in Chinese stocks.
“It will allow institutional investors to come back. “Professional investors were very scared of this delisting risk, so they stayed on the sidelines,” Brendan Ahern, chief investment officer at US-based investment manager KraneShares, told CNBC’s “Squawk Box Asia.” “Wednesday.
According to the US-China Economic and Security Review Commission, as of September 30, there were 262 Chinese companies listed on US exchanges with a total market capitalization of $775 billion.
“As that risk is eliminated based on the PCAOB announcement, you’re going to see investment dollars come back to these names,” Ahern said.
“These internet giants are really where investors want to invest when it comes to China,” Ahern said.
But he also warned that it’s still “days, weeks, months before we see that capital go back into space.”
But he also noted that policy support would help spur the growth of these companies. Last week, China pledged to increase domestic consumption next year as the country moves to boost growth after exiting the zero-Covid policy.
“2023 is the year where we’re going to have a lot of government policy support, like increased domestic consumption,” Ahern said. “About 25% of all retail sales are carried out through companies.”
“The Chinese government actually needs these internet companies, which explains why we’ve seen a lag in some of the regulatory controls we’ve experienced in 2021,” Ahern said.