Overnight, a large number of Chinese concept stocks fell sharply in the US stock market. The US Securities Regulatory Commission (SEC) included five Chinese companies in the tentative list of the foreign company Accountability Act (hfcaa), which frustrated the market’s confidence in Chinese concept stocks. On March 11, the A-share and Hong Kong stock markets attracted much attention before opening.
On the morning of March 11, Shanghai and Shenzhen stock markets opened sharply lower, and the three major indexes fell by more than 2%; In the afternoon, agriculture, forestry, animal husbandry and fishery, non bank finance and other sectors rose and turned red, and finally the three major A-share indexes rose slightly and closed. In terms of Hong Kong stocks, the Hang Seng Index fell 336.47 points to 2055379 points, down 1.61%; Affected by the sharp decline in technology stocks, the Hang Seng technology index fell more than 4%, breaking a new record low.
Shen Meng, director of Xiangsong capital, told the economic observer that A-Shares fell sharply in the morning driven by the external market; After the premier attended the press conference, the market began to rise. On the whole, Hong Kong stocks are still affected by mainland funds and external markets, and the main business of listing is closely related to the economic situation of the mainland. Under the overall downward trend of the mainland economy, the overall performance expectation of Hong Kong stock listed enterprises is not strong, so the rebound foundation is weak.
trend differentiation
Affected by the external market, Shanghai and Shenzhen markets opened low on the 11th and rose and turned red in the afternoon. As of the close, the Shanghai composite index reported 330975 points, up 0.41%; Shenzhen composite index reported 1244737 points, up 0.62%; Gem index reported 266546 points, up 1.15%. The transaction volume of the two cities exceeded trillion yuan for the seventh consecutive trading day, and the net sale of funds from the North was 5.042 billion yuan.
On the disk, most sectors closed red. Agriculture, forestry, animal husbandry and fishery sector led the rise, with an increase of 3.18%, and medicine and biology sector rose 2.99%. As for the non bank financial sector, as of the closing, it rose by 1.49%, and 41 A-share listed securities companies closed in red. The Boc International (China) Co.Ltd(601696) , Chinalin Securities Co.Ltd(002945) limit rose by 10.03% and 9.99% respectively.
Aisia, chief economist of the Asia Pacific region of the French Foreign Trade Bank (Natixis), recently released a report that during China’s two sessions, in addition to the economic target of China’s GDP growth of 5.5% in 2022, another clear signal transmitted by the government work report is to strengthen fiscal and monetary policy support. First, in terms of the most obvious financial instruments, it is still planned to arrange 3.65 trillion yuan of local government special bonds this year, the same as last year. The government will intensify efforts to promote consumption in rural areas through “green smart appliances to the countryside”. According to a survey by the people’s Bank of China, the proportion of households who prefer saving has increased from 46% in 2019 to 52% at present, indicating that consumer confidence has not fully recovered. Although the growth of disposable income has improved, the proportion of retail consumption has decreased from 15% in 2019 to 13% in 2021.
China Merchants Bank Co.Ltd(600036) Research Institute believes that some positive factors have emerged in the market. The market signal of regulatory stability is highlighted. Recently, more than 20 leading companies such as Kweichow Moutai Co.Ltd(600519) , Yonghui Superstores Co.Ltd(601933) , Semiconductor Manufacturing International Corporation(688981) , Wuxi Apptec Co.Ltd(603259) , Tongwei Co.Ltd(600438) , etc. rarely released operating data from January to February. However, monthly financial data have not been released in the past. The overall performance of these companies is bright, with a median revenue growth rate of 40% and a median profit growth rate of 50%, which is helpful to boost market confidence. In addition, the sustained implementation of the steady growth policy can still be expected. The 5.5% GDP target set in the government work report is relatively positive. If this target is to be achieved, the market speculates that more substantive steady growth policies involving real estate and infrastructure should be launched in the follow-up. At the same time, the central bank should turn in the balance profit of RMB 1 trillion to the finance, highlighting the coordination and linkage of monetary and fiscal policies to jointly contribute to steady growth.
In terms of Hong Kong stocks, the three major indexes fell across the board. As of the close, the Hang Seng Index fell 1.61% to 2055379; The Hang Seng China enterprise index fell 2.69% to 706060 points; The Hang Seng technology index fell 4.28% to 424697.
Puyin international research believes that despite many negative factors overseas, the Hong Kong stock market has sent a rare signal that deserves investors’ attention: technically, the Hang Seng Index has touched the long-term support of the 250 month moving average for the first time in 30 years, and the current retreat range of the high point is close to 2018; In terms of capital, the current capital outflow rate of Hong Kong stocks is similar to that of the financial crisis in 2008, second only to that of the Asian financial crisis in 1998; In terms of positions, the short selling positions of Hong Kong stocks are at an all-time high, the market sentiment has dropped to the freezing point, the market sentiment is extremely pessimistic, and the space to continue short selling is limited.
zhonggai shares fell sharply
On March 10 local time, the US Securities Regulatory Commission announced that five Chinese companies will be included in the provisional list of the foreign company Accountability Act, including Baiji Shenzhou, yum China, zaiding pharmaceutical, shengmei semiconductor and Huang pharmaceutical. The SEC has the right to delist all foreign companies from the SEC’s report based on the requirements of the exchange’s Accountability Act.
However, the above-mentioned companies can provide evidence to the sec before March 29 to prove that they do not meet the conditions for delisting; However, if it cannot be proved, it will be included in the “confirmed delisting list”.
On the morning of March 11, zaiding pharmaceutical announced that the SEC temporarily identified zaiding pharmaceutical as a company using an audit institution that has not been reviewed by the PCAOB (American public company accounting oversight board) on March 8, 2022, which is expected and is a routine operation based on the requirements of the HFCA Act (foreign company Accountability Act). The other four companies were also provisionally recognized by the SEC on March 8, 2022. Zaiding pharmaceutical expects that as companies submit annual reports (large accelerated reporting companies with the same fiscal year as the company need to complete the filing on or before March 1, 2022), more companies may be added to the provisional list by the SEC in the future.
Baiji Shenzhou also announced that as a global biotechnology company, the company has been actively seeking solutions to meet the requirements of the foreign company Accountability Act, and looks forward to maintaining the listing of the company on the Nasdaq market, the stock exchange of Hong Kong Limited and the science and Innovation Board of Shanghai Stock Exchange.
On the 10th, China concept shares fell sharply. Iqiyi plummeted 21.71%, pinduoduo fell more than 17%, JD fell nearly 16%, bilibilibili US stocks fell more than 14%, and Alibaba US stocks fell nearly 8%.
On the Hong Kong stock market, as of the close of the 11th, Baiji Shenzhou (6160. HK) reported HK $110.3 / share, down 4.91%; Yum China (9987. HK) reported HK $359 / share, down 5.97%; Zaiding Pharmaceutical (9688. HK) reported HK $273.2 per share, down 6.31%; Hehuang Pharmaceutical (0013. HK) fell 9.47% to HK $26.3 per share. ACMR closed at US $63.8 per share yesterday, down 22.05%.
Pang Ming, chief economist of Huaxing securities (Hong Kong), said that if zhonggai shares get together and return to the Hong Kong stock market, it may bring some pressure on the liquidity, trading and valuation level of the Hong Kong stock market. However, considering that the return of China concept shares will be a gradual process, the shares of second listed companies in Hong Kong are expected to be included in the trading scope of Hong Kong stock connect, and some investors of China concept shares listed in the United States may turn to holding or trading their second listed shares in Hong Kong, the above pressure may be partially alleviated.
At present, the weight of targets listed in Hong Kong and the United States in Hang Seng Index, state-owned enterprise index and Hang Seng technology index has exceeded 10%, 12% and 25% respectively. Pang Ming estimated that in the future, more new economy companies will choose to go to Hong Kong for secondary listing, Dual Major listing or initial listing, and the proportion of these industries in the Hang Seng Index and other major indexes will further increase.
in the concept of stock uncertainty geometry
In the early morning of the 11th, the CSRC responded to the SEC’s identification of five listed companies in the United States as “relevant issuers” with delisting risk according to the foreign company accountability law. The CSRC said that we have noticed this situation. This is a normal step for US regulators to implement the foreign company Accountability Act and relevant implementation rules. We have previously expressed our attitude on the implementation of the foreign company accountability law for many times. We respect that overseas regulators strengthen the supervision of relevant accounting firms in order to improve the quality of financial information of listed companies, but we firmly oppose the wrong practice of some forces to politicize securities supervision. We have always adhered to the spirit of openness and cooperation, and are willing to solve the inspection and investigation of relevant firms by the US regulatory authorities through regulatory cooperation, which is also in line with the international practice.
The CSRC said that recently, the CSRC and the Ministry of finance have continued to carry out communication and dialogue with the US public company accounting supervision board (PCAOB) and made positive progress. We believe that through joint efforts, the two sides will be able to make cooperative arrangements in line with the legal provisions and regulatory requirements of the two countries as soon as possible, jointly protect the legitimate rights and interests of global investors and promote the healthy and stable development of the markets of the two countries.
Pang Ming said that on March 8, the SEC disclosed the initial delisting risk list, including five Chinese enterprises listed in the United States. This announcement only follows the final amendment to the regulatory rules published by the SEC at the end of 2021, without any incremental information. These five companies are only the first batch of companies that submitted their annual reports in accordance with the SEC’s revised forms 20-F, 40-f, 10-K and n-csr, so they belong to the first batch of companies to go through the procedures, and the list is still possible to be modified in the future.
The final draft of the foreign company Accountability Act 2021 has been published and implemented. Compared with the previous exposure draft, the final amendment clearly stipulates that the three-year starting point of PCAOB’s inability to effectively carry out audit and inspection is from fiscal year 2021, and the company is required to disclose whether it adopts the vie structure. This means that there are still about two years for zhonggai shares to be listed in the United States, carefully evaluate their risk management and listing place choice, and seize the time to put it into action.
Pang Ming’s team believes that if China and the United States can deal with regulatory cooperation in accordance with the principles of “marketization and rule of law” proposed by the CSRC, it is still expected to further promote and develop bilateral, multilateral and international cooperation in cross-border securities supervision and accounting supervision on the basis of professionalism and equality and mutual benefit, and eliminate the uncertainty faced by Zhongyu shares. For the currently listed zhonggai stocks, they may continue to face certain market sentiment fluctuations and valuation pressure in the short term. Relevant companies should continue to strengthen compliance and assess delisting risks in the follow-up, and the cost of seeking audit opinions and legal opinions and meeting regulatory requirements will increase. These companies should also pay attention to existing debt contracts and derivative contracts to prevent delisting from being identified as an event of default or triggering a change of control.
