Chinese Tech Stocks Jump as U.S. Delisting Concerns Ease

(Bloomberg) — Chinese technology stocks advanced as Beijing sought to remove a key sticking point in its audit dispute with the U.S., easing investor concerns over shares getting kicked off from American exchanges.

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The Hang Seng Tech Index gained 5.4%, the most in more than two weeks, counting shares of companies that are also listed in the U.S. such as Bilibili Inc., XPeng Inc. and Baidu Inc. among its top gainers.

China is planning to modify a rule that restricts offshore-listed firms from sharing sensitive financial data with foreign regulators, Beijing said on Saturday. The changes may pave the way for U.S. authorities to gain full access to auditing reports of Chinese firms listed there, helping resolve a key bilateral dispute that had unnerved investors.

Read: China Removes Key Hurdle to Allow U.S. Full Access to Audits

The Nasdaq Golden Dragon Index of Chinese firms jumped on Friday as Bloomberg reported of China’s considerations. Financial markets in the mainland are closed due to a public holiday on Monday.

“The modification will partially address concerns of delisting risks if the cross-border regulatory cooperation could go smoothly as laid out per the rule,” Citigroup analyst Alicia Yap wrote in a report on Monday.

Read: China’s Rule Change to Help Ease Delisting Risks: Street Wrap

However, some analysts caution that more definitive action is needed from Chinese authorities to fully resolve the tension with U.S. regulators over delisting risks. They add that certain companies like state-owned enterprises and tech firms with more sensitive data may be barred from U.S. listings ultimately.

The Hang Seng Tech Index is down near 60% since its February 2021 peak, driven by Beijing’s regulatory crackdown and uncertainties over the fate of Chinese tech giants trading in the U.S.

That’s even after the gauge has recovered more than 30% from a record low in mid-March after Beijing vowed to keep capital markets stable and make regulatory changes more predictable.

“In order to negate investors’ fears totally on the aspect of ADR delisting, we need to see or have some form of concrete actions finalized from China rather than pipelines framework that are still in the midst of drafting,” said Kelvin Wong, analyst at CMC Markets.

Explainer: How U.S. Is Targeting Chinese Firms for Delisting