Will China capital stocks be forced to go to Hong Kong to beat the new rules on joint audit in the United States?

category:Finance
 Will China capital stocks be forced to go to Hong Kong to beat the new rules on joint audit in the United States?


On Friday (after 6 U.S. Eastern time), the U.S. presidents working group on financial markets, led by Mr. mnuchin, issued a report to the US Securities and Futures Commission (SEC), suggesting that China capital stock companies should conduct joint audit through audit companies with comparable resources and experience recognized by the public company accounting oversight board (PCAOB) to meet the new standards.

The new rules can provide a transitional period (up to January 1, 2022) for companies that have already listed in the United States, while Chinese enterprises preparing to go public in the United States are required to comply with the new rules at the time of listing.

Subsequently, the China Securities Regulatory Commission said on the 8th that open dialogue and cooperation is the right way to solve the problem, and said that the only way to achieve win-win results for both sides is to solve the problems of common relations through dialogue.

Previously, in an interview with Chinese media in June, Yi Huiman, chairman of the China Securities Regulatory Commission, said that since 2019, China Securities Regulatory Commission has clearly agreed to carry out consultations on the joint inspection method to PCAOB, and has taken the initiative to put forward specific proposals to PCAOB, but the US side has not given any positive feedback.

Source: ft

Joint audit may increase time cost

This tough attitude of the United States is not groundless. In mid July, foreign media reported that a senior official of the US State Department said that the trump administration planned to unilaterally cancel a memorandum of understanding on law enforcement cooperation signed in 2013. (for details, please refer to the China capital stock return tide is coming soon?? The United States may cancel the memorandum of China US audit cooperation)

Ye Zhuo Dong, Chief Strategic Officer of Tencent music (TME. N), one of Chinas capital stocks, responded at a quarterly earnings analysts meeting on the 11th that it was too early to speculate whether the company would be delisted, and said that they could choose to be audited by us auditors.

As for the new accounting rules announced by the US government on Monday, Shen Qiyu, a partner of Guangdong Xinda law firm, believed in an interview with time finance on August 11 that it was only a measure of technical adjustment to a certain extent.

At present, it seems that Chinese enterprises planning to go to the United States for listing, through relevant sponsors and employing a joint audit institution outside China, will not have a substantial impact on the companies to be listed in the United States under the conditions of meeting the local regulatory authorities (SEC and PCAOB) Shen Qiyu said.

He pointed out that from the disclosed documents, it is not clear how to comply, how to grasp the degree of compliance, and what the standards are. He also believes that there is certain space in this to facilitate the adaptation and implementation of subsequent measures. Therefore, how to formulate the follow-up specific measures still depends on the further consultation between China and the United States.

However, whether the audit draft can be provided to the US side is a contradiction that the Chinese and American regulators have not been able to unify.

In response, Li Tian (pseudonym), manager of China Audit Department of PricewaterhouseCoopers, told Time Finance on the 11th that judging from the current situation, the big four (i.e., the worlds four largest accounting firms: PwC, Deloitte, KPMG, Ernst & Young) have not made some specific reactions and measures, because the big four itself has overseas member offices. In addition, in order to meet the regulatory requirements of the United States, important audit information of overseas listed companies would be communicated with overseas members and issued by overseas member offices.

For domestic local accounting firms, Li Tian believes that the impact will be relatively greater, because there is a lack of special relationship between overseas members, the audit process can not be guaranteed. However, he believes that the key lies in whether regulators can negotiate a more effective way to deal with it. Before that, accounting firms generally held a wait-and-see attitude.

It is worth mentioning that another factor that many companies like to list in the United States is that the approval time for listing in the United States is fast. However, if one more approval process is set up this time, will the approval time be increased, thus slowing down the overall listing process?

However, Li Tian believes that it is difficult to predict how much longer the audit cycle will be than before. The factors that affect the audit cycle are complex. This is like applying for a US visa. If the United States does not release the visa and delays deliberately, the whole process will become uncontrollable. If this happens, the audit cost and listing cost will be higher than before. This is also a hindrance to companies going to the United States.

Recently, many companies are considering changing their listing strategies in the United States. One of them is youkechang, which has applied for listing in the United States twice. Youke workshop announced on August 6 that the company decided not to sell the securities originally scheduled for issuance, and said it would consider alternative listing options.

In this regard, Shen Qiyu said that although his company has not received any intention of listing in the United States recently, according to his analysis, it is not entirely affected by the Sino US audit turmoil.

Generally, Internet companies are more likely to be listed in the United States, because the valuation of such enterprises in the United States is easier to be recognized, while the valuation of other types of enterprises, such as manufacturing or traditional industries, listed in Hong Kong or listed in China, has no essential difference from that in the United States.

Multiple differentiation of listing path of Chinese Enterprises

The U.S. sacrifice of the talisman, leading to the opening of the 7 most popular stocks were scared out of a deep hole, followed by several days of falling. At the same time, it also affected the Na index, so as to end the seven consecutive rise.

At the close of the 7th, among the top Chinese capital stock companies, Alibaba (Baba. N) fell 5.14%, JD. O fell 4.39%, ntES. O fell 3.22%, and PDD. O fell 3.73%. The above-mentioned companies narrowed their losses on Monday (10th) and partially closed higher on Tuesday (12th), but most popular Chinese stocks remained down.

Alibaba, a popular Chinese capital stock, failed to escape the fate of falling at the opening of the market for several days in a row, especially when it was scared out of the pit by the new audit rules on July 7. (source: wind)

Among them, GSX. N, an online educational institution, fell 18.82% on the 7th, due to the fact that citron, a well-known short seller, once again made a short follow-up on twitter. It is worth noting that since the exposure of Ruixing audit fraud, iqiyi, tal and who to learn from have been shorted by institutions.

In the face of the difficulties of the US government and individual institutions, it has been repeatedly reported that several Chinese companies are about to return to Hong Kong stock market. According to the incomplete statistics of time finance and economics, there are 7 zhonggai stocks with this intention recently, including New Oriental, Huazhu Hotel, yum China, baozun e-commerce, Wanguo data, tal and century Hualian. Together, the seven China capital stocks have raised at least US $7.5 billion (about HK $58.5 billion), which is almost equal to the total amount (including the over allotment rights) raised by Netease and JD (about HK $58.8 billion).

In addition, recently, there are five enterprises, Sogou, Yiche, Sina, Ctrip and douyu, discussing whether to accept the privatization offer, that is, to prepare to delist from US stocks. There are also rumors that Ctrip is going to re list in Hong Kong after delisting from US stocks. All the companies publicly said they would not comment on the listing related reports.

CICC issued a research report on the 10th, saying that it would raise the target price of the HKEx by 15% to HK $446, and believed that the HKEx had nearly 20% room to increase compared with the current price. The reason for the increase is that the listing process of China capital stock companies in Hong Kong is faster than expected, and the stock shares of some companies are still in continuous conversion after the secondary listing of Hong Kong shares, and the trading volume of the local market is further enlarged.

Not only does Hong Kong embrace the return of China capital stocks, but Beijing has also released good news recently. On July 27, Beijing Municipal Local Financial Supervision and Administration Bureau said that Beijing will sort out the general stocks going to the United States and China, and support the development of returning a shares or Hong Kong shares for those meeting the conditions of return.

This regulation is another important measure to encourage the return of China General stocks to a shares after the successive announcements of the China Securities Regulatory Commission, the Shanghai Stock Exchange and the Shenzhen Stock Exchange on the science and technology innovation board and the growth enterprise market of red chip enterprises (including red chips listed in the United States and those not listed abroad).

Therefore, in the near future, there are many enterprises planning to go to A-share listing news. At present, there are Jingdong Digital Technology Co., Ltd., which takes the road of financial technology, Ruoyu technology, which has developed folding smart phone display screen, and Geely Automobile (secondary listing), which is known as the leading automobile enterprise. And still on the outside inquiry said not to comment, one of the four AI Dragon technology, and Baidu online disk will be split from Baidu independent listing. Of course, some companies still choose to go to the United States for listing. For example, there are shell house, which is one of the shareholders of Tencent, lufax of Ping An Group, and Xiaopeng automobile, one of the three new forces of Chinas car making. All of these three companies have recently submitted their prospectuses in the US SEC. Source: time finance editor: Liang Li source: time finance editor: Yang Bin_ NF4368

Therefore, in the near future, there are many enterprises planning to go to A-share listing news. At present, there are Jingdong Digital Technology Co., Ltd., which takes the road of financial technology, Ruoyu technology, which has developed folding smart phone display screen, and Geely Automobile (secondary listing), which is known as the leading automobile enterprise. And still on the outside inquiry said not to comment, one of the four AI Dragon technology, and Baidu online disk will be split from Baidu independent listing.

Of course, some companies still choose to go to the United States for listing. For example, there are shell house, which is one of the shareholders of Tencent, lufax of Ping An Group, and Xiaopeng automobile, one of the three new forces of Chinas car making. All of these three companies have recently submitted their prospectuses in the US SEC.

Source: time finance editor: Liang Li