(Bloomberg) - Chinese stocks listed in the US jumped by the most in more than two months as talks to avoid the delisting of companies from the New York Stock Exchange gathered momentum.
The Nasdaq Golden Dragon China Index jumped 6.3%, the most since June. Regulators in China have told accounting firms to prepare to bring audit paperwork for US-listed Chinese companies to Hong Kong, where it can be reviewed by the US Public Company Accounting Oversight Board, according to a person who asked not to be identified as the discussions are private.
Shares of US-listed tech giants including Alibaba Group Holding Ltd., JD.com Inc. and Pinduoduo Inc. all rose at least 8% Thursday. Meanwhile, NetEase gained 4.5%, while electric-vehicle makers Nio Inc. and Li Auto Inc. added 6.4% and 4.6% respectively.
The PCAOB declined to comment, while the China Securities Regulatory Commission and the US Securities and Exchange Commission didn’t immediately respond to requests for comment. The Wall Street Journal reported on the matter earlier.
“This is a fascinating development,” said Ed Moya, senior market analyst at Oanda Corp. “An official confirmation is needed but expectations were growing that this would get done as both countries are dealing with economic fragility,” he added.
Concern that an audit dispute could trigger a mass, forced exit of Chinese names from US markets has weighed on the shares for more than a year. Earlier this month, China Life Insurance Co., PetroChina Co. and China Petroleum & Chemical Corp. were among a group of state-owned companies that announced plans to delist from American exchanges.
As a result, the prospect of a resolution is a boon for embattled Chinese stocks.
The rally in US trading followed what was the best day in nearly four months for Hong Kong’s Hang Seng Tech Index, which rose 6% on Thursday. It helped lead the city’s benchmark Hang Seng Index to a 3.6% gain, making it the best performer among Asia’s major equity gauges.
In addition to the Chinese government’s 1 trillion yuan ($146 billion) of support for the economy, traders cited short covering and an adjustment of positions ahead of Jackson Hole.
“Whether or not the rumor on an audit deal is true, Hong Kong shorts have pressed their bets in a light summer tape,” said Brendan Ahern, chief investment officer at Krane Fund Advisors LLC. “We have been setting up for an epic short squeeze that is contributing to today’s move.”
Stocks in Hong Kong had slumped to the lowest in months this week, as global risk-off sentiment spread ahead of the Federal Reserve’s Jackson Hole symposium. Concerns over China’s economic growth, with a deepening property crisis and power shortages spurred by a severe drought, had added to the gloom.
Following three days of losses, the Hang Seng Index was also looking ripe for a rebound to some market watchers based on various technical indicators.
The gauge was near “oversold” levels on monthly measures of the relative strength index, approaching the 30-threshold that’s never been reached in data going back to 1972. Morgan Stanley strategist Gilbert Wong said “the risk of short squeeze in China and Hong Kong equities is rising.”
Even as talks progress, somes are staying cautiously optimistic. “At this point it appears details are lacking but if a deal between U.S. and Chinese regulators comes to a fruition, it would be a very good sign for investors in U.S. listed Chinese ADRs,” said Michael O’Rourke, chief market strategist at JonesTrading.
“Considering the fact that some Chinese companies have commenced the U.S. delisting process, it is a positive sign to see the situation stabilize,” he added.
(Updates pricing throughout.)
By Matt Turner and Abhishek Vishnoi
