Chinese companies and delisting

Investing and Markets 📈
#1

I know there’s some chat about this in the community already (I did search and read) but I couldn’t really get the answers I was looking for.

Specifically for Chinese companies being delisted that haven’t gone bust or been subject to a merger, what happens with our shares in freetrade? If they get ported over to HK market for example, freetrade doesn’t offer access. Do they just get sold at the current value and the money added to our account?

Also, on a side note, is there any point in trying to buy more shares in the dip if there a strong chance they will be delisted in coming years? Is their value expected just continue to drop and drop? I’ve not really been through this kind of thing before so it’s all new to me!

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#2

How is this question still not answered. Please Freetrade, as a premium member I just want a straight answer of scenarios, even if they are bad, so I can make my decisions appropriately.

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#3

Some more info on the situation:

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#4

Thanks :+1:

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#5

Obviously you’d want an official response from FT but there is a response from a NZ firm that also uses DriveWealth .

Currently, shares are removed from the Hatch platform if they fall below our US broker criteria ($1b market capitalisation, share price over $1). If they are delisted and moved to another market exchange like the OTC, they can still be sold through our US broker, but not through the Hatch site. Investors who own shares in this situation will need to contact our team (hello@hatchinvest.nz) and we will facilitate the sale with DriveWealth.
We can’t guarantee what will happen with ADRs that are delisted as a result of this legislation and ask that Hatch investors stay up to date with news in this space. You’ll want to make informed decisions about your current or future investments in Chinese or other foreign countries’ ADRs

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#6

Ok cool, I would rather trade my ADR shares for shares on the Nikkei though. Be so much simpler if the index was added.

#7

What do you all think of the risk situation for Chinese stocks? The delisting threat is certainly a direct problem for investors like us who buy through US stock exchanges, as it could mean a risk of not being able to trade those stocks. I wouldn’t want to rely on Freetrade customer service being able to find a workaround.

My thinking is it’s safe to assume that even if Chinese stocks were removed from US stock exchanges, emerging markets ETFs managed in the UK and Europe would still be able to trade the stocks because ETF managers buy and sell on many stock exchanges around the world. So it may still be ok to buy Chinese stocks through Europe-based ETFs.

But how bad would things have to get in the US-China trade war before the US government prohibited Chinese stocks from being included in indexes published by American fund managers, or prohibited American fund managers from trading in Chinese stocks at all? And will the UK government, which has been trying to be friendly with both sides, decide to side with the Americans or with the Chinese on this?

#8

The UK will side with America. There is going to be a escalating tit for tat war and where it ends up is just a guess but it doesn’t look good.

#9

I see the delisting risk as an empty threat as it stands. If Chinese stocks are delisted from american exchanges then this will hurt US, UK and Euro investors and institutions massively. Most ETFs and Funds are invested in the ADR stocks rather than through HK or SS exchanges. It really wouldn’t be straightforward to swap between the 2. Even if they did manage this you will see fees rise massively to cover the costs
The bigger risk with Chinese stocks in the short to medium term is the Chinese governments anti trust sanctions. You can already see what it’s done to Alibaba share price and the same is likely for tencent. Over the long term I’m still bullish and ready to accept the political risk

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#10

Same, I love the company’s and think they are going to be money printers, but I worry about being screwed by geopolitics and the platform I happen to be trading on, i.e the stocks are delisted and I am forced to sell on a dip.

Would suck to be invested in great companies l but get screwed just because of where you trade…

#11

@Nick2 MSCI China might be one solution. Outsources a lot of the admin and diversification headache if you’re happy with the allocation policy.

Totally agree. I take a view that Xi isn’t forever, and if current party policy negatively impacts overall economic prospects for the Chinese middle classe, there could well be a change in management and a rapprochement may follow but the situation as it currently stands is not catastrophic, but could deteriorate relatively quickly.

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