US SEC May Delist Chinese Companies... Tencent and Alibaba Plunge Up to 21%

SEC Implements Foreign Company Accountability Act... Targeting Chinese Firms
Concerns Over Delisting from US Stock Market Amid Chinese Government Regulations
Experts Say "Stock Prices Likely to Remain Weak"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] Following speculation that U.S. authorities might delist major Chinese tech giants Tencent and Alibaba, which are dual-listed on both Chinese and U.S. stock exchanges, their stock prices have been sharply declining.

As of 1:30 PM on the 25th, Tencent's stock price on the Hong Kong Hang Seng Index fell 2.3% from the previous day to 609 Hong Kong dollars, while Alibaba dropped 3.8% to 221 Hong Kong dollars.

Tencent's price represents a 21% decline from its peak on January 25, and Alibaba has returned to the 220 Hong Kong dollar range for the first time in two months since recording 220 Hong Kong dollars on January 12. Additionally, the Hang Seng Index has been declining for a week since the 18th, falling more than 5% compared to that day.

The background to this downward trend is analyzed as the U.S. Securities and Exchange Commission (SEC) announcing on the 24th (local time) its intention to scrutinize the financial status of foreign companies more closely.

On that day, the SEC revealed plans to investigate whether foreign governments directly influence foreign companies under the "Holding Foreign Companies Accountable Act" (HFCA Act), passed by Congress in December last year. It will require foreign companies to submit related documents. Furthermore, the SEC plans to demand annual reports on the financial conditions of foreign companies. This measure will be implemented after a 30-day grace period.

This SEC regulation is interpreted as targeting large Chinese corporations.

Daniel So, an analyst at CMB International, stated, "Recently, there have been plans for Chinese authorities to strengthen regulations on large tech companies like Tencent. Amid this, the regulatory moves by U.S. authorities have caused investor anxiety, which has been reflected in the stock prices."

Earlier, Bloomberg reported that the Chinese government recently announced plans to establish joint ventures with tech companies like Tencent to jointly manage consumer data collected by these companies. This is seen as an effort by Chinese authorities to strengthen control over the domestic internet industry and monitor big data.

Along with this simultaneous domestic and international regulatory trend and concerns that the valuations of major Chinese tech stocks are overestimated, there are expectations that the stock price weakness will continue.

Linus Ip, an analyst at First Shanghai Securities, said, "The important factor is the valuation of large tech stocks such as Alibaba and Tencent. As these companies' values are being reassessed, combined with regulatory trends in both China and the U.S., a turnaround in stock prices is unlikely in the near term."

This content was produced with the assistance of AI translation services.