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Five Chinese state-owned companies delisted from the New York Stock Exchange

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By Tara Subramaniam and Philip Wang, CNN

Five Chinese state-owned companies, including the country’s top energy and chemical company, have opted to delist from the New York Stock Exchange by the end of August.

In separate statements released on Friday, China Life Insurance, PetroChina, Sinopec, Aluminum Corporation of China and Sinopec Shanghai Petrochemical said they notified the NYSE and requested “voluntary delisting.”

All five companies cited “low U.S. revenue” and “high administrative burden and costs” as their reason for leaving.

However, the news comes after the five were flagged by the U.S. Securities and Exchange Commission in May, according to Reuters, for failing to meet U.S. auditing standards.

China’s securities watchdog, the China Securities Regulatory Commission, said on Friday it was aware of the situation and that “it is normal for companies to be listed or delisted from any market. “.

“We will keep in touch with foreign regulatory institutions and jointly protect the rights of businesses and investors,” he said.

Increased control

The news comes as the Securities and Exchange Commission steps up its scrutiny of audits of Chinese companies.

The committee can fire the companies the exchange if they do not allow US watchdogs to inspect their financial audits for three consecutive years. China has for years rejected American audits of his companies.

Chinese companies trading overseas are required to hold their audit documents in mainland China, where they cannot be reviewed by foreign agencies.

But in April, China’s securities watchdog proposed to change a decade-old rule that prohibits Chinese companies from sharing sensitive data and financial information with foreign regulators. The Amendment could allow US regulators to inspect the audit reports of Chinese companies listed in New York.

Nevertheless, companies like Alibaba are taking steps to prepare for a possible loss of direct access to the US capital market.

At the end of July, the Securities and Exchange Commission added Alibaba has a list of more than 150 companies that could be kicked out if their audits cannot be inspected within the next three years, joining some of China’s biggest companies like JD.com and Baidu.

Even before the commission added Alibaba to its watchlist, the company said it would seek a primary listing on the Hong Kong stock exchange.

Currently, Alibaba has a secondary listing on the Hong Kong Stock Exchange.

“A primary listing status in Hong Kong gives Chinese ADRs (American Depository Shares) the opportunity to diversify their listing risk and retain access to the public equity market” if they are forced to leave the United States, Goldman Sachs analysts said in a recent report.

If the transition goes smoothly for Alibaba, it could “pave the way” for many other Chinese ADRs to pursue a similar change, Citi analysts said.

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