Merchants work on the floor of the NYSE in New York.
NYSE
BEIJING – For Americans who want to play China’s growth story, there is now a political risk to investing in U.S.-listed U.S. stocks.
That means a Chinese company trading on exchanges like the Nasdaq would lose access to a wide collection of buyers, sellers and intermediaries. The centralization of these different market participants helps to create something called liquidity, which allows investors to turn their holdings into cash quickly.
The development of the U.S. stock market over the decades also means that companies are listed on established exchanges as part of a system of regulation and institutional work that can offer specific investment protections.
Once a stock is listed, the company’s shares can be traded through a process called “over-the-counter.” But that means the stock is out of the system – of major financial institutions, deep liquidity and the ability for sellers to find a buyer quickly without losing money.
“Price is the most practical thing for an average investor to worry about,” said James Early, CEO of investment research firm Stansberry China.
“You may have to give up (stock to be listed soon) sooner or later, so make your bet now,” he said. “Are you better off sell now, or wait for a kick of some sort? “
The New York Stock Exchange announced last week that it would release three Chinese telecommunications giants named in President Donald Trump’s action order that banned U.S. investment in affiliated companies. to the Chinese army.
Assuming trades would be settled through a third-party system on Jan. 7 and 8, the exchange said it would suspend local trading in shares of China Mobile, China Unicom and China Telecom before the market opens on 11 January.
Shares of all three New York trading companies fell Monday. The trading rate for the day was approaching the previous month, according to data from Wind Information.
But the companies ’trading shares in Hong Kong rose during Tuesday’s session after the New York Stock Exchange overturned its delisting decision, citing further talks with regulators on the regulatory order.
Trump’s action order gives U.S. investors until Nov. 11 to remove, or sell out, an affected hold. Most of the companies listed, if publicly traded, are not listed in the US
Conflict between the US and China has escalated under the Trump administration. A controversy that focused on trade a little over two years ago has poured into technology and finance.
It is unclear how US President Joe Biden will handle financial flows between the two countries. Analysts expect his administration to attack traditional U.S. allies to work together to put more pressure on Beijing to address long-standing complaints about the country’s unfair business practices.
Delisting is not the end
Chinese stocks were listed from U.S. exchanges for reasons other than politics.
About a decade ago, a regulatory breach of accounting fraud led to a phase of evasion. Other Chinese companies chose to return to their home market where they could raise more money from investors who were more familiar with their businesses.
Last summer, Chinese coffee chain operator Luckin Coffee was listed from the Nasdaq after the company revealed 2.2 billion Yuan ($ 340 million) in sales. The 52-week low stock hit 95 cents a share.
But shares rose even after going “over the counter” and closed at $ 8.64 per head on Monday.
Most of the new businesses listed in New York in the last few years are consumer-oriented technology companies.
Chinese businesses remain enthusiastic about the New York market for the reputation, while global investors are still buying into it. China-based companies raised $ 11.7 billion through 30 initial public offerings in the U.S. last year, the largest capital since 2014, according to Renaissance Capital.
The company’s analysis found that, in 2020, the Chinese companies that raised at least $ 100 million had an average overall return of 81%.