More chinese firms seek delisting from US market

The listing of Chinese companies in the United States remains stagnant, with only one IPO in the first half of this year but 19 companies delisted, a report by Ernst & Young showed on Tuesday.

That's a very different story from 2010, when 42 Chinese companies were successfully listed in the US market and three were delisted.

As a result, the total funds raised so far this year, at $72 million, are only 5 percent of those in the first half of 2011.

Ivan Tong, assurance partner with Ernst & Young, said more Chinese companies are seeking delisting partly because the stock prices are lower than expected, thus "they would rather wait for better chances and better markets".

He added that "stock exchanges in Europe have been active in attracting Chinese companies".

However, Tao Jingzhou, managing partner of Dechert LLP Asia Practice, said no markets would be available for Chinese companies unless they adopt stricter self-discipline.

"Investor confidence has been heavily affected because of a series of financial defects among US-listed Chinese companies revealed by (the recent) Muddy Waters Research (into Chinese due diligent levels)," Tao said.

"The supervision standard in Europe and on other global boards is as strict as in the US, thus Chinese companies seeking listing anywhere else in the world are very much likely to face the same results as in the US," he said.

As for the US Public Company Accounting Oversight Board's requirement to examine the audit working papers of US-listed Chinese companies, Tong said that there are "procedural difficulties", as some State-owned enterprises are reluctant to allow the board to do so due to concerns over the leaking of sensitive information.

But he said he hopes that regulators from the US and China could find a solution, such as allowing the Chinese authorities to conduct the inspection instead.

"After all, the US market would still be a major destination for Chinese companies to get listed overseas," Tong said.

But Tao said Chinese regulators should be more open in receiving foreign supervision.

"You cannot have your cake and eat it," he said.

Tao said Chinese companies' financial reports need to be more transparent in order to win investors' and regulators' confidence.

"The freeze for Chinese companies in overseas market may last at least two more years," he added.

Wei Tian

(China Daily 07/04/2012 page13)