Alibaba, Didi fuel $93 billion rally for Chinese stocks in US

Bloomberg

Alibaba Group Holding Ltd and Didi Global Inc rallied for a second day, adding $93 billion in value to US listed Chinese stocks as fears of potential delistings eased.
The Nasdaq Golden Dragon China Index jumped 7.4%, adding to the climb after Beijing regulators published revised draft rules scrapping requirements that on-site inspections should be mainly conducted by Chinese regulatory agencies.
Alibaba rises 6.6% and Didi climbed 6.4%, while JD.com Inc advanced 7.1%. Pinduoduo Inc, Bilibili Inc and iQiyi Inc were among the top gainers, climbing at least 16% each. The advance in American depositary receipts tracked a 5.4% gain in Hong Kong’s Hang Seng Tech Index, the sharpest in two weeks. China was closed for a holiday.
“For now, investors are erasing the regulatory risk premium which is helping both markets and sentiment recover,” said Olivier d’Assier, head of APAC applied research at Qontigo. While the regulatory risks is receding, there still leaves a lot of macro risk which is yet unknown, as well as geopolitics, he added.
Beijing’s move could potentially remove a key hurdle to US regulators gaining full access to auditing reports for Chinese companies listed in New York, ending a long-running dispute over data sharing. Last week, Bloomberg News had reported that Beijing is drafting a framework that will allow a majority of Chinese firms to keep their listings.
“We believe this is an important step in clarifying China’s stance on the audit dispute,” Morgan Stanley equity strategists led by Laura Wang said in an April 3 note. “We maintain our view that the likelihood of a final agreement being reached over the ADR audit dispute is now higher.”
While the latest statement appears to show Beijing is more constructive on this, some remain cautious until the final resolution comes through.
“I am expecting more twists going forward, as the US and China go back and forth on this,” said Henry Guo, an analyst at M Science LLC. “The regulation overhang for Chinese ADRs should remain in the near future and investors are cautious about investing in them as regulation-related risks are totally out of their control.”
SEC chief last week dialled down speculation of an imminent deal with Chinese counterpart on the delisting issue.
China has modified a decade-long rule that restricted offshore-listed firms’ financial data sharing practice, potentially removing a key hurdle for US regulators to gain full access to auditing reports of the majority of the 200-plus Chinese companies listed in New York.
The amendments mark an unusual reversal by Beijing, potentially ending a decades-long dispute that escalated when the US set a 2024 deadline for kicking non-compliant businesses off the New York Stock Exchange and Nasdaq. The compromise would also show China’s willingness to balance national security concerns with the needs of investors and businesses at a time when its economy faces numerous challenges.
Under the rules issued in 2009, working papers drafted onshore during the process of overseas share sales were forbidden from being shared with any foreign entities or individuals. Working papers that concern state secrets or national security were also prohibited from being stored, processed or transmitted in non-confidential computer systems.