Scott Murdoch and Sayantani Ghosh

HONG KONG/SINGAPORE, (Reuters) – Didi Global, the ride-hailing company that operates in New York City’s stock exchange, may cause a chilling effect after the drop in listings of Chinese companies in this world’s largest market.

Chinese listings in the United States have fallen sharply since Didi https://www.reuters.com/technology/didi-global-start-work-delisting-new-york-pursue-ipo-hong-kong-2021-12-03 debuted in New York on June 30 – defying regulators’ wishes to pause the listing – due mainly to concerns about an unprecedented regulatory crackdown on technology companies.

Chinese regulators began an investigation of Didi just two days after its $4.4billion initial public offer.

Due to the U.S. government’s continued threat of delisting Chinese companies who do not comply with their auditing requirements, this regulatory action has already caused a significant slowdown in Chinese listed.

According to Dealogic data, the second half of 2017 was the most quiet for U.S. listing by Chinese companies since 2017. Listings have reached nearly $13 Billion in 2021, compared with $13.6 Billion last year.

Chinese companies that list on U.S. stock exchanges must disclose https://www.reuters.com/business/us-sec-mandates-foreign-companies-spell-out-ownership-structure-disclose-2021-12-02 whether they are owned or controlled by a government entity, and provide evidence of their auditing inspections, the Securities and Exchange Commission (SEC) said on Thursday.

One Hong Kong banker said to Reuters that there will be only limited IPOs from China to the U.S. right now, after the financial sector in Hong Kong weighed the effects of Didi’s decision on the pipeline.

As the person wasn’t authorized to address the media, the banker refused to be identified.

Mitchell Kim is an independent research analyst who writes on Smartkarma. He said that investors already wary of China’s IPOs would be more concerned about the future.

Kim explained that U.S. investment may be a concern for Chinese investors, and Chinese firms may find it difficult to access U.S. capital. Because so many U.S. tech investors reside in China, it is possible that the Chinese tech sector could have a more challenging time.

Golden Gate Ventures partner Justin Hall said while Didi’s delisting might negatively impact global investor appetite for Chinese technology companies, it’s too early to say the same for Chinese retail and institutional investors.

He said, “It is important to remember that even though Chinese technology companies don’t list as often in America, it doesn’t mean they won’t be able to have hugely successful public offerings on Chinese markets.”

“By the similar vein, founders and executives of Chinese technology companies might choose for safer exchanges in future. This is because all the effort required to list on U.S.-based stock exchanges would be for nothing if they are later required to delist.

According to market participants, Hong Kong has benefited from Sino-U.S. conflict with several U.S.-listed Chinese companies having carried out secondary listing there in recent years. This was partly in order to provide back-up for New York delistings.

A Hong Kong investment banker was slightly more positive that Chinese companies handling small amounts of data would still be eligible for New York Listing.

According to sources last month, Didi’s highest executives were pressured by Chinese regulators to come up with a plan for delisting from the New York Stock Exchange.

“Didi’s problem is with data. “If the data issue can be resolved, then everything will be fine,” stated the banker who declined to identify himself due to sensitive information.