Asian equities were largely off overnight.
The SEC added Weibo, Baidu, iQIYI, and three other China ADRs during US trading hours to their HFCAA non-compliant list. All 273 US-listed Chinese ADRs will be on the SEC list as the companies file their 2021 annual report with the SEC. After the US close, Bloomberg interviewed SEC Chair Gary Gensler, who gave measured comments on the discussions to resolve the issue. Chairman Gensler pointed out that sensitive information, i.e. state secrets, are unlikely to be included in an audit.
The China Securities Regulatory Commission responded with equally measured comments. The CSRC stated, “Both sides are willing to resolve differences and problems, and the final result depends on both sides’ wisdom and original aspirations.” Since last August, CSRC Chairman Yi and SEC Chairman Gensler have had three video calls to discuss the matter, according to the CSRC. Hopefully, the two sides can put this issue to bed.
My colleague Derek noted that the value of goods sold by Alibaba is 3X larger than Amazon though its market cap is 5X smaller. JD.com sells almost as much as Amazon but has a market cap of only $95 billion versus Amazon’s $1.682 trillion. Big fund families will dabble in the US ADRs because they are so cheap, but they will want to keep the names out of their top ten, which will be disclosed tonight .
The companies with US ADRs believe their stocks are cheap, as we’ve seen numerous companies announce buybacks. Alibaba increased their buyback plan to $25B from $15B while Tencent bought other 799k shares overnight, extending their buying for the 5day. Vipshop announced they will buy $1B of their stock in the next 24 months after announcing a $500mm buyback last year. Weibo announced overnight they would be $500mm of stock over the next 12 months.
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