US-traded Chinese firms on optimistic sentiment
US-listed Chinese stocks continued to rally over the past week since a key meeting addressed a number of concerns regarding China’s stock market and US-listed Chinese companies, prompting positive responses from companies as they move to boost investor confidence.
Following the meeting of the State Council’s Financial Stability and Development Committee last week, during which officials expressed support for overseas listings and optimism over China-US regulatory talks, some companies, most notably Alibaba Group, have launched share buyback programs, while some consider alternative listing options.
On Wednesday, Alibaba Group’s shares rose 3 percent as of press time, after the company announced plans to expand its share buyback program to a record $25 billion, the biggest stock buyback by a listed Chinese company, following a stock price plunge earlier this month.
The keenly watched NASDAQ Golden Dragon China Index posted a 2.3 percent gain as of press time on Wednesday after a 7.84-percent jump Tuesday.
The performance of these stocks, especially technology stocks, came as a result of fresh impetus from the meeting of the State Council’s Financial Stability and Development Committee last week that gave the US-traded Chinese stocks a much-needed confidence boost, analysts said.
The meeting stressed that Chinese and US regulators have maintained good communication and achieved progress on forming specific cooperation mechanisms to resolve pressing concerns, and the Chinese government would continue to support all types of enterprises to list overseas.
The clear messages from the meeting played a role in stabilizing market expectations for US-listed Chinese stocks, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times on Wednesday.
Several Chinese mainland-listed companies’ plans to issue global depositary receipts on the Swiss exchange also had a positive impact, as it indicated the US market will not be the only choice for Chinese enterprises, Dong added.
The financial meeting also pledged to promote the rectification work of large online platforms, noting that both “red and green lights” should be set to promote the steady and healthy development of the platform economy and improve its international competitiveness.
“It shows that anti-monopoly and information security supervision of online platforms will be strengthened. However, on the basis of solving these two problems, these companies are encouraged to expand the market in compliance with the policy,” Dong said.
Alibaba Group on Tuesday announced that its board had authorized a massive stock buyback program of $25 billion, a sign of confidence in the company’s continued growth, according to a statement sent to the Global Times on Tuesday.
The program will be effective for a two-year period through March 2024. As of March 18, 2022, Alibaba had purchased 56.2 million American depositary shares under a previously announced share buyback program, totaling approximately $9.2 billion, Alibaba confirmed.
Market analysts said that uncertainties persist about the negotiation process between Chinese and US securities regulators.
As the previous freefall of these stocks was mainly a result of the distrust of US regulators, their price stability depends heavily on geopolitical factors, Dong said.
“Whether Chinese and US regulators can reach a common ground on audit standards remains to be seen. Since talks are continuing, it’s unlike that there will be a major policy change at the moment,” Dong said.
The rebound of the Chinese stocks was expected after their deep dive, but there could be further tumbles, Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, told the Global Times on Wednesday.
“As the US Congress passed the Holding Foreign Companies Accountable Act some of the obstacles for Chinese listed companies have not been removed. The problem is not expected to be solved in the short term,” Dong Dengxin said.
Author: Qi Xijia, Global Times