- Chinese stocks that went public in the United States in 2021 have been battered by Beijing’s crackdown.
- Listed companies in 2021 fell an average of 34%, according to data firm FactSet.
- One strategist said the drop could be a buying opportunity, yet another said no company seemed safe.
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Shares of Chinese or Hong Kong companies listed on the US stock exchanges in 2021 had fallen 34% on average as the market closed on Monday, new data showed, showing how Beijing’s crackdown on large corporations has scared investors .
The 33.8% average drop compares to an average 2.7% drop for all companies that made IPOs in the United States in 2021, according to figures provided to Insider by financial data firm FactSet. .
As of Monday, 38 of 49 Chinese and Hong Kong companies listed in the United States in 2021 had seen their shares fall. Chinese companies that went public in the United States in 2020 have also been hit hard, falling an average of 14.1% since their listing date at Monday’s close.
The Chinese government has tightened its grip on big business – especially in the tech and education sectors – in a series of interventions that have shaken the confidence of foreign investors in the country.
Beijing has embarked on China’s largest ridesharing app, Didi Chuxing, just days after raising $ 4.4 billion on the New York Stock Exchange in a June 30 listing. It launched a review of its use of data and banned it from app stores, dropping inventory from over $ 16 in late June to $ 8 in late July.
The crackdown has pushed institutional investors away from Chinese companies in general, with the country’s CSI 300 stock index falling more than 7% in 2021, compared to the 20% gain in the US S&P 500.
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“Many investors are avoiding Chinese stocks altogether because no company seems immune to a crackdown by Beijing,” Edward Moya, chief market analyst at the Oanda trading platform, told Insider.
Still, high levels of volatility are part of the picture when investing in both IPOs and emerging market companies, said Fahad Kamal, chief investment officer at Societe Generale’s private bank Kleinwort Hambros.
He told Insider that the sharp drop in prices could be seen as an opportunity, given the potential of China’s economy over the next decade. “It is just absurdly impossible to ignore,” he said. “I think it would be shortsighted not to have emerging markets in our portfolio.”
Some investors appear to have warmed towards Chinese equities again in recent weeks, with the Hong Kong Hang Seng Tech Index rising about 14% since falling to its lowest in 14 months on August 20. , according to Bloomberg data.
Retail investors have been keen to buy lower Chinese companies listed in the United States, according to data firm Vanda Research. He said amateur investors last week bought more than $ 400 million of Chinese stocks listed in the United States, with Alibaba as the frontrunner.
Still, big risks remain for investors – and there is uncertainty about the future of Chinese IPOs in the United States.
Beijing has proposed new rules that would require companies to undergo strict cybersecurity checks before listing overseas and could even ban major tech IPOs altogether in the United States, according to reports. The United States Securities and Exchange Commission is also tightening its disclosure requirements for Chinese companies, according to a Reuters report.
“It no longer seems optimal for a Chinese company to want to register in the United States,” Moya said.