Losses in Hong Kong – Chinese Didi Prepares for US Delisting
Hong Kong shares fell on Friday. Tech giants have raised concerns over the launch of Chinese companies on U.S. stock exchanges. Added to this was Didi Global’s decision to cancel from New York. The Hang Seng Index closed at 23766.69 at the close of trading on Friday, falling 0.1 percent. That replaced a two-day gain, and a 1.3 percent drop ended the week. This was already the third weekly loss in a row. The Hang Seng Index fell 1.5 percent on Friday. China’s Shanghai Composite Index grew 0.9 percent.
Alibaba fell 2.6 percent and deepened the route as it trades at record lows. Meituan, the food delivery platform operator, lost 2.7 percent, while Tencent fell 2.3 percent. According to the head of investments, Stephanie Leung, the decline in the Hang Seng index overnight due to weak earnings is led by Chinese technology stocks. U.S. markets were vulnerable due to Omicron’s concerns and harsh comments from the Fed chairman.
Annoyed by the failed quarterly revenue reports last month, the tech giants are now suffering losses. This is caused by concerns that Chinese companies may soon be released from U.S. stock exchanges. The SEC on Thursday approached the adoption of a new law aimed at ensuring compliance with the audit requirements of foreign firms, including Chinese companies. On February 17, consistent sales in China’s tech sector shattered about $1 trillion in the Hang Seng Tech Index market value. The Nasdaq Golden Dragon China Index, drop to a 19-month low on Thursday.
Didi Global Decision
Following the SEC move, Didi Global announced that it was preparing to be removed from the list in the U.S. The travel giant said it was preparing for Hong Kong’s initial public offering. Shares of Didi Global fell to $7.80 in New York on Thursday, for a total of 0.1 percent. Uncertainty in China’s real estate sector continues. China Aoyuan Group said the company could not repay $651 million in debt after a recent downgrade of its credit rating. As a result, its shares fell 11.9 percent.
Tongling Jieya Biologic Technology went up 44.4 percent. Major Asian markets rose 0.8 percent in South Korea, 0.2 percent in Australia, and 0.1 percent in Japan.
According to a Didi Global official, the company will begin the withdrawal process from the NYSE and prepare for immediate entry into Hong Kong. The company plan includes converting ADS from NYSE to free trade shares on another exchange. The company said it would hold a special meeting to vote on a specific issue. At the same time, Didi Global continues to list Class A shares on the Hong Kong Stock Exchange Main Board.
Didi Global and Regulations
Analysts mention the most astute route for Didi Global would be to catch the Hong Kong list first; It then offers U.S. shareholders a conversion from ADS to Hong Kong stocks in the U.S. privatization and sale process. This avoids the price-sensitive issue; In parallel, it will reduce the demand for cash in privatization.
It should be noted that the company did not name the reason for the removal from the list. The announcement came after the Chinese Cyberspace Administration opened a review of the company’s cybersecurity. Soon, the CAC began reviewing cybersecurity at other companies. Shortly after the investigation was announced, Didi’s main app was banned from accepting new users, and dozens of apps were finally removed from app stores.
The abolition of Didi Global is one of the worst consequences of Beijing’s tightening control over the country’s technology sector. This could have a significant impact on Chinese tech firms. The Chinese crackdown on Internet platforms has sparked fears because the process was opaque. Experts say that this will negatively affect China’s private sector dynamism over time.
It should be noted that Beijing regulations for technology firms to conduct offshore IPOs have become stricter; This comes after the CAC, China’s top Internet watchdog, proposed an amendment to its cybersecurity review measures in July. Under the changes, technology platform operators handling data from more than 1 million users will apply to the Cyber Security Review Office if they plan to enter the overseas market.
Last month, the CAC enrolled another document demanding a cyber security review for parent corporations seeking Hong Kong IPOs. Due to the growing cyber security scrutiny, numerous tech firms have postponed or canceled their IPO plans.
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