The first batch of the inspection triggers more problems in the China-US Listings. This probably would not impact the deal until the audit results are visible to the market participants. The stakeholders have signed the statement protocol containing the end of dispute between China and the US. The broads signing the agreements are The US Public Company Accounting Oversight Board, China Securities Regulatory Commission and China’s Ministry of Finance. Referring to the protocol, Chinese authorities believe that there is independent discretion in PCAOB.
This is in order to choose issuers’ audit for inspection so that they could get access to the audit firms personnel. They have the ability to process information to the US Securities and Exchange Commission. The scenario would complete the inspection process without any hindrances. The SEC can actually use PCAOB information for any purposes not exceptionally for civil enforcement actions. The first batch of inspection would be for e-commerce businesses like Alibaba Group Holding and JD.com. Yum China Holdings, holder of KFC and Pizza Hut, is also under the first batch inspection.
ECM bankers so far believe that the agreement is agreeable. It is somehow allowing Chinese issuers to access the US markets once more. However, this way might not be able to attract major China-US listings in the future. The reason is because a lot of issuers have chosen to list in Hong Kong instead as they are technologically more strategic. Moreover, after this case, it seems like Chinese regulations would be challenging in the US listings.
In addition, ECM bankers argue that 90% of ECM clients planning to list in the US, now change direction to Hong Kong instead.