Alibaba Group Holdings Ltd’s (NYSE: BABA) Could Benefit From An Audit Deal Between US and China

Alibaba Group Holdings Ltd’s (NYSE: BABA) American depositary receipts and those of other Chinese tech firms are facing uncertainty in US markets as they stare at delisting.

China and US looking to strike a deal in auditing of US-listed Chinese firms 

The news regarding an imminent audit deal between Chinese regulators and US counterparts has been buoying investor and trader sentiment across Asia. In addition, Chinese authorities unveiled an economic stimulus package last week that could also lift investor sentiment.

The window of opportunity for Beijing and Washington to come to an agreement to stop the widespread delisting of Chinese firms whose stocks trade on American exchanges is closing. Officials in Beijing have been particularly explicit about their willingness to address what has emerged as a significant drag on US-listed Chinese equities in the past two months. The shift in tone comes as it appears highly probable that Beijing’s three-year deadline to conform with the Holding Foreign Companies Accountable Act of 2020 will be reduced.

Alibaba moved its primary listing to Hong Kong

Recently following reports that the US SEC will delist Chinese stocks from US exchanges if they can’t allow inspection of their auditors by 2024, Alibaba moved primary listing in the Hong Kong exchange. The US may prohibit dealing in the shares of businesses whose auditors cannot be examined by the US audit watchdog over three straight years according to the Holding Foreign Companies Accountable Act of 2020, which went into force in 2021.

According to a recent article in The Wall Street Journal, Alibaba founder Jack Ma intends to give up ownership of Ant Group Co. when the fintech powerhouse separates from Alibaba due to regulatory constraints from the Chinese authorities.

Following the publication of their most recent annual reports, three more Chinese corporations were included in the HFCAA blacklist on Friday. The SEC has flagged over 150 businesses as noncompliant thus far. Notable names include  Chinese e-commerce giants Pinduoduo Inc. and JD.com Inc and restaurant chain Yum China Holdings Inc.

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