Future for Chinese companies in US: expert opinion

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18-06-2019 09:31

Future for Chinese companies in US: expert opinion

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Future for Chinese companies in US: expert opinion

The escalation of the US-China trade conflict may prompt Washington to limit access for the Chinese companies to the American capital market, South China Morning Post reports.

Steve Bannon, the former White House chief strategist, said access to the US markets should be restricted as long as China refuses to conduct the proposed reforms.

According to chief executive officer of China Renaissance Group Fan Bao, the Chinese companies have been asking challenging questions lately, wondering whether they should list their shares on the US stock exchanges or do it closer to home. "Between the offshore markets — Hong Kong versus the US — the future direction seems to be pointing more in favour of Hong Kong," Bao said. "I think, particularly for those Chinese companies where they have significant political risks embedded in their business model, Hong Kong seems to be a more logical choice."

Since 2013, the Chinese companies have raised almost $46.1 billion as a result of listings in the United States. Moreover, the Chinese companies accounted for 55% of all new listings in the US conducted by foreign companies, thus raising over $1.18 billion.

Strategists from Bank of America said that China and the United States could be separated financially in the longer term. It may happen if some Chinese companies delist their depositary receipts and IPOs are held in Hong Kong or continental China instead of the United States. However, it might have a negative impact on the new sectors of the Chinese economy as the US market is much deeper, the experts noted.

Meanwhile, professor at Leonard N. Stern School of Business James Finch outlined that Donald Trump’s administration should be cautious when it comes to access to capital markets. “If the US markets aren't viewed as a viable, stable counterparty, other markets are going to evolve as a counteracting force to that," Finch said.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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