U.S. audit officials finished their first round of on-site inspection of Chinese firms earlier than expected. Investors hope the move is a good signal that prevents hundreds of U.S.-listed Chinese companies from delisting.
According to Bloomberg, inspectors from the U.S. Public Company Accounting Oversight Board (PCAOB) will leave Hong Kong by this weekend ahead of the original schedule of mid-November.
Hao Hong, a partner at Grow Investment Group, told the news outlet, “If the US-China audit woes are resolved, indeed it will be a positive for stocks, especially ADRs and tech.”
In response to the news, stocks of Chinese firms traded in Hong Kong’s Hang Seng Index rallied as much as 8.5%, and the yuan increased over 1% on Friday. Alibaba stocks surged as much as 21%, while Tencent and Meituan rose over 10%.
However, Bloomberg reported that it’s too early to tell whether Chinese companies under inspection will pass the test. PCAOB might release its first report on initial key findings in the coming weeks. The report will unveil problems of those firms as well as possible recommendations.
Washington and Beijing had been in dispute for over a decade as U.S. regulators wanted to review U.S.-listed Chinese companies’ accounting documents as required by law. But the Beijing regime had been unwilling to do so, citing national security and confidentiality concerns.
As a result, the U.S. had often been placing those Chinese firms on delisting lists. Due to the dispute, about 200 U.S. listed-Chinese companies might be delisted from U.S. exchanges.
However, after years of negotiations, Washington and Beijing reached a preliminary agreement in August, allowing PCAOB to access Chinese accounting papers.
Under the deal, PCAOB officials would travel to Hong Kong in mid-September to inspect those Chinese firms’ work papers.Chinese e-commerce giant Alibaba reportedly was among the first to be inspected by U.S. regulators.