Hong Kong Internet Stocks Applaud Proposed CSRC Rule Change

Important news

On Saturday evening, the China Securities Regulatory Commission (CSRC), the Chinese SEC, issued a “Notice on Public Solicitation of Comments on the “Provisions on Strengthening the Confidentiality and Archives Management Work Related to the Overseas Issues and Listing of Effects by Domestic Enterprises”. The release was followed by a Q&A with the CSRC, which clarified that the proposed rule change removes the language that on-site inspections should only be performed by Chinese regulatory authorities.The proposed rule change would allow US-listed Chinese companies to provide their auditors on-site inspection by the US Public Company Accounting Oversight Board (PCAOB), enabling them to comply with the Holding Foreign Companies Accountable Act (HFCAA).

The message was issued not only by the CSRC, but also by the Ministry of Finance and the State Secret Administration. As we noted before, allowing HFCAA compliance would require an amendment to Chinese law. Here we go! Mainland China has a four-day weekend, although regulators released it on Saturday, demonstrating the importance of this release.

The Q&A states that the review “…will also help relevant regulators and foreign regulators to safely and efficiently conduct cross-border regulatory cooperation activities, including joint inspections, and jointly protect the rights and interests of global investors.” to protect.” The weekend announcement does not solve the problem as two are needed for the tango ie the US side wants proof that the on-site audits can indeed take place. The release will reduce the chance of delisting, although that chance will not be reduced to zero. Hopefully, the two sides can resolve this issue, which would remove a risk for US and global investors. It is worth noting that this news has not received much attention from Western financial media.

Shanghai’s 25 million residents will be tested for Covid-19 as the city grapples with a significant outbreak. Overnight, three new covid vaccines were approved by the State Drug Administration, two of which are mRNA vaccines, which are purportedly more effective. An effective mRNA vaccine would make it possible to move away from the draconian lockdown policy, boosting consumer confidence.

The best performing sector in Hong Kong at the moment was real estate, which gained +7.66%, outperforming healthcare, which gained +5.42%, and the consumer goods sector with high internet use, which gained +4.59%. won, and communications, which won +3.49% . The catalyst was Evergrande’s statement that work had resumed on 95% of its projects. Real estate was included in Deputy Prime Minister Liu He’s statement on March 16e with an emphasis on addressing risks in the sector. The market seems to believe that more support for the sector is on the way.

Asian stock markets were higher as Hong Kong and India outperformed China, Taiwan and Pakistan were on vacation. Both Hong Kong and China are off tomorrow, so there will be no China Last Night tomorrow.

The Hang Seng Index gained +2.1%, while the Hang Seng Tech Index gained +5.43%, led by internet stocks. Volumes were +8% higher than Friday, but just 69% off the 1-year average as Southbound Stock Connect closed today. Breadth was strong with 422 advances and only 62 declines, as consumer staples represented the only down sector. Real estate was the best performer with a gain of +7.66%, followed by healthcare, which gained +5.42%, and the Internet-based consumer goods sector, up +4.59%, and communications services, which gained +3 .49% won. Electric vehicle names were positive about March delivery data and BYD’s announcement that it will stop making non-EVs.

Shanghai, Shenzhen and the STAR Board were closed today.

Last night’s exchange rates, prices and returns

Mainland bond, currency and commodities markets closed overnight.


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