China’s Airlines Could Join the Multibillion-Dollar Exit From US Stock Markets

  • China Southern Airlines, China Eastern pointed at by Saxo Bank
  • Five state-owned companies disclosed delisting plans last week

The decision by five Chinese state-owned companies to leave the US market adds to skepticism that authorities in both countries can reach an agreement on disclosure rules, with analysts seeing state-controlled airlines as the next potential group to depart, potentially followed by internet giants.

China and Hong Kong are the only jurisdictions worldwide that don’t allow inspections by the US Public Company Accounting Oversight Board, with Beijing officials citing national security and confidentiality concerns. With a deadline for delistings set for 2024 for those firms that aren’t compliant, US lawmakers are considering passing a bill to bring it forward to next year.

The announcement on Aug. 12 by giants including China Life Insurance Co. and PetroChina Co. to seek delisting from New York “is not a good sign for the auditing spat,” said Gary Ng, a senior economist at Natixis SA in Hong Kong. “It is likely to see more state-owned enterprises and private firms controlling a large amount of data to follow the same steps.”

China Eastern Airlines Corp. and China Southern Airlines Co. could “soon” announce similar intentions, according to Redmond Wong, a Greater China market strategist at Saxo Bank.

Closer to Home

Chinese airlines traded in the US are much more liquid at home

China Eastern Airlines and China Southern Airlines didn’t immediately respond to requests for comment.

Both carriers are controlled by the State-owned Assets Supervision and Administration Commission of the State Council (SASAC), the same entity that rules over four of the companies that disclosed their US exit plans last week, he said. The carriers are among Chinese companies identified by the Securities and Exchange Commission as potentially facing delisting at the deadline, he added.

China Eastern Airlines raised $227 million in its US initial public offering back in 1997, while China Southern Airlines garnered $632 million the same year. Shares of both also trade in Hong Kong and China.

Chinese internet and platform firms will be in focus in coming weeks, Saxo Bank’s Wong said, given they hold a “huge amount” of potentially sensitive data on millions of Chinese individuals, public enterprises and institutions.

He cited some widely traded Chinese names stateside, such as Alibaba Group Holding Ltd., Baidu Inc., BiliBili Inc.,, Pinduoduo Inc., Ltd., iQIYI Inc., KE Holdings Inc., Weibo Corp. and Tencent Music Entertainment Group.

The plausibility of Chinese authorities making concessions to US regulators is “getting increasingly slim in the midst of pervasive Sino-American strategic competition,” Wong wrote in a note.

Announcements by companies voluntarily delisting doesn’t necessarily indicate that an agreement between authorities is more distant, said Shaun Wu, a partner of Paul Hastings in Hong Kong. Rather, “many U.S.-listed Chinese companies may now be weighing the risks of delisting and enforcement by the SEC, and deciding how best to balance competing concerns.”

Author: Filipe Pacheco, Bloomberg

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