Us stocks fell sharply on the evening of December 3, with individual stocks falling nearly 32%. Among them, Chindata Group Holdings Limited fell nearly 32%, Canaan Inc fell nearly 28%, DiDi Global Inc. fell more than 22%, Li Auto Inc. fell more than 15%, NIO Inc. fell more than 11%, XPeng Inc. fell more than 9%, BABA and Pinduoduo fell more than 8%.
The market blamed the plunge on the final amendment to the regulatory rules of the Foreign Company Accountability Act (HFCAA) published by the US SEC on December 2nd. In fact, there was a collective slump in Chinese stocks as early as May this year, which was also caused by the fact that PCAOB was proposing new rules and frameworks under the Foreign Corporate Accountability Act (HFCAA).
The market view is that the final amendment is compared with the previous draft for soliciting opinions.It hasn't changed much.It is mainly made clear in the details node:
How to identify
SEC will summon auditors that PCAOB cannot inquire effectively, especially those subject to foreign government restrictions, by summoning multiple Chinese auditors and identifying a large number of Chinese listed companies in the United States.
When did you start to identify?
After the foreign listed company has submitted its 21-year financial report and the PCAOB has identified the relevant audit institutions that do not cooperate with the investigation, the SEC will begin its identification work in 2022.
How does the company know that it is identified as commission-identified issuer
SEC will publish the list of companies identified as commission-identified issuer on a special website, and the company can appeal to SEC by email within 15 working days, complaining that it has been wrongly identified and needs to provide relevant proof.
What happens after being identified as commission-identified issuer
The identified company is required to disclose what HFCAA requires in its annual report for the next fiscal year. For example, if a company is identified as commission-identified issuer in its 21-year financial report, it needs to be disclosed in its 22-year financial report (that is, when it is disclosed at the beginning of 23 years).
It has been recognized as commission-identified issuer for three consecutive years and may face the risk of delisting.
The SEC website publishes a list of companies identified each year, if it is identified for three consecutive years(that is, the deadline for the publication of the annual report around March 2023)SEC will require that trading in US stocks be suspended, effective four days from the date of announcement.
The HFCAA proposal has been around for a long time, and many Chinese stocks have left a way out-- a secondary listing in Hong Kong, and Hong Kong is ready for this. The HKEx announced a consultation summary on November 19 to optimize and simplify the listing system for overseas issuers. Secondary listing or dual major listing in Hong Kong will be more flexible and convenient, and the new revision will take effect on January 1, 2022.
This revision mainly liberalizes the conditions for the secondary listing of Hong Kong stocks. Enterprises do not need to prove that they are innovative enterprises, and the minimum threshold for listing has also been lowered, from the original market value of more than 40 billion Hong Kong dollars and listed for more than 2 fiscal years, or the market value of more than 10 billion Hong Kong dollars. And the most recent fiscal year income > 1 billion Hong Kong dollars, reduced to a market value of more than 3 billion Hong Kong dollars and listed for more than five years, or a market capitalization of more than 10 billion Hong Kong dollars and listed for more than two years.
Compared with the previous draft for soliciting opinions, the content of the final amendment has not changed much, mainly because it has made clear the details. There is still more than a year to go before the deadline of the publication period of the annual report around March 2023, and there will still be variables. Moreover, the Hong Kong market is ready for this.Based on the above, the market point of view is that the recent market reaction of US-listed stocks is excessive panic of funds in the short term.