Scott Murdoch and Sayantani Ghosh

HONG KONG/SINGAPORE – Didi Global, the ride-hailing company that operates in New York City may feel a chillier after the drop in listings of Chinese companies in New York’s stock exchange this year. Advisors and bankers said the move could create a deeper fear.

Chinese listing have declined sharply in the United States since Didi made its debut in New York City on June 30, defying regulatory requests to halt the listing. This was due to fears about unprecedented regulation of technology companies.

Chinese regulators launched an investigation of Didi two days after the initial public offering for $4.4 billion. They ordered 25 mobile app stores to delete Didi’s apps and then blocked Didi from being available to new users on mainland China.

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 contributed to a significant slowdown in Chinese listed.

Dealogic data revealed that the second-half of 2018 was quieter than the first six months of 2017. The U.S. Listings by Chinese Firms in America have totalled almost $13 billion, up from $13.6 billion last year.

The Securities and Exchange Commission (SEC), Thursday said that Chinese companies that are listed on U.S. stock markets must declare whether or not they are controlled by government entities and show evidence of auditing inspections.

As the Hong Kong financial sector digested what the Didi decision meant for the stock market, one Hong Kong banker stated to Reuters: “We are only going to witness limited IPOs out China into America now.”

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.”

“In the same vein founders and executives of Chinese technology companies might choose to trade on safer exchanges, as all the effort required to list on U.S.-based stock exchanges would have no effect if they are later forced 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.

Sources revealed to Reuters that Didi’s top executives were pressured by Chinese regulators to come up with a plan for delisting from the New York Stock Exchange. This was in response to data security concerns.

“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.