Second-largest deal of the year made in Hong Kong . . .
Earlier this week, the Chinese e-commerce group JD.com completed the world’s second-largest share sale of the year. The US$4-billion Hong Kong listing was a poignant turn away from the U.S. market. JD’s secondary listing comes amid a wave of ‘homecomings’ as Chinese companies start to leave U.S. markets amid growing tension between Beijing and Washington. According to China Renaissance, an investment bank, the homecomings could involve U.S.-listed Chinese shares worth a combined value of more than US$1 trillion. The mass return is either a sign of Chinese corporate confidence in Hong Kong and Mainland stock markets or an exodus before the Trump administration pushes through rules requiring Chinese companies to adhere to U.S. accounting practices.
Generally (un)Accepted Accounting Principles . . .
The uptick in secondary-listings and go-private deals of U.S.-listed Chinese companies follows a recent statement from U.S. President Trump in which he said he was looking “very strongly” at imposing Washington’s Generally Accepted Accounting Principles (GAAP) on U.S.-listed Chinese companies. Currently, under U.S. Securities and Exchange Commission (SEC) rules, foreign companies listed on the U.S. exchange are required to follow a set of international accounting rules. In contrast, U.S. companies must follow GAAP. An estimated 90 per cent of the 276 Chinese businesses currently listed in the U.S. would be affected if GAAP were imposed.
More business for bankers . . .
The homecoming of U.S.-listed Chinese firms has set a new pace for equity markets this year. According to data compiled by Bloomberg, U.S.-listed Chinese companies have announced four go-private deals with a combined value of US$8.1B so far this year. China’s state media has hailed the recent flurry of Hong Kong and potential Mainland listings as a significant step in enabling Chinese investors to buy shares of Chinese firms.
- BNN Bloomberg: China Inc. pulls out of U.S. market at fastest pace since 2015
- Global Times: Homecoming of US-listed Chinese companies becomes pace-setting in 2020
- Financial Times: JD.com shares jump on ‘homecoming’ debut in Hong Kong