Those exposed to Chinese ADRs—whether it’s a CEO of a U.S.-listed Chinese company, or an equity strategist dealing with the China market—are now all considering one question: Is the U.S. really going to kick Chinese companies off its stock exchanges?
“The threat is growing in a significant way,” says Sandeep Rao, a researcher at Leverage Shares.
The NASDAQ Golden Dragon China Index, which tracks Chinese companies listed in the U.S., is down by around 7% since “Liberation Day.” By comparison, Hong Kong’s Hang Seng Tech Index, which tracks tech companies traded in the Chinese city (including some that also trade in the U.S.) is down by 4.6% over the same period.
Some investors “have been shifting over from holding the U.S. ticker to the Hong Kong ticker because of the delisting threat,” Rao says.
In mid-April, Goldman Sachs estimated that U.S. institutional investors hold about $830 billion worth of shares in Chinese companies, spread across the mainland Chinese, Hong Kong, and U.S. markets. About $250 billion of that is in Chinese ADRs.
Still, “holdings of equities by foreigners, particularly U.S. holders, have come down meaningfully versus where we were five years ago,” Cameron Chui, Asia equity strategist for JPMorgan Private Bank, said during a Wednesday briefing to reporters when asked the possibility of delistings. “The risk has definitely been meaningfully reduced.”
Rao notes that U.S. investors might still be able to keep trading in Chinese companies even if they do get delisted—it would just be in the less protected OTC market. Tencent, one of China’s largest tech companies, has its main listing in Hong Kong, but also trades in the U.S. OTC market.
In its mid-April report, Goldman Sachs highlighted 27 U.S.-listed Chinese companies that will likely be eligible for a Hong Kong listing (whether a secondary or primary listing), including PDD, retail stock trading platform Futu, and digital logistics platform Full Truck Alliance.
“It’s quite sensible to have, at the very least, a secondary listing in Hong Kong if you’re a U.S.-listed Chinese company,” Rao says.
But Hong Kong isn’t a perfect replacement for New York. “There are no positives from this. Liquidity in Hong Kong is not the same as in the U.S.,” Chui said on Wednesday.
