Chinese tech stocks got a boost after the U.S. and China struck a preliminary deal in August, allowing U.S. regulators to audit the records of Chinese companies listed In New York. This deal is a first step toward avoiding the delisting of about 200 firms from New York exchanges.
American inspectors plan to be on the ground by mid-September to begin the process, which should go a long way to mitigate a key overhang in the space.
Beijing had barred foreign regulators from accessing the documents of Chinese companies. But the U.S. Holding Foreign Companies Accountable Act demands that the U.S. Public Company Accounting Oversight Board have access to the audits of Chinese and Hong Kong firms. The standoff came to a head in March when the SEC gave five Chinese companies an ultimatum: comply with audit requests within three years or be delisted from New York exchanges.
Emerging Markets ETF issuer EMQQ Global had long maintained that the delisting risk of Chinese ADRs trading in the U.S. had been low. In March, EMQQ Global Founder & CIO Kevin T. Carter assured investors during a briefing video that there was “no immediate delisting threat.”
For one thing, the SEC and China Securities Regulatory Commission had years to work out a deal. And even if they couldn’t reach a deal in time, Carter noted that any holdings of Chinese stocks could “be transferred quite easily” to the Hong Kong Exchange.
China is the largest country exposure for the Emerging Markets Internet & Ecommerce ETF (NYSEArca: EMQQ), making up a little more than half the fund’s weight as of Wednesday. By focusing on the internet and e-commerce in emerging markets, EMQQ looks to capture the growth and innovation happening in some of the largest and fastest-growing populations in the world.
The EMQQ Index climbed 3.7% in August, with the top 5 contributors all coming from China, including Pinduoduo, KE Holdings, Meituan, Tencent, and Alibaba.
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