
Chinese Risk Exposure Update
Sentiment has been increasingly turning negative on China this year. Three main developments I see at play are the Coronavirus missteps, the new bill unanimously passed by the senate this past Wednesday around foreign issuers on U.S. markets and lastly the reemergence of China attempting to increase its control on Hong Kong.
President Trump has increasingly blamed China for the Coronavirus pandemic.1 Taking his thoughts to Twitter Wednesday the President had this to say:

Keeping objective, whether you agree with the blame or not, this finger pointing increases preexisting conflicts between the U.S. and China that began to kick off in early 2018. The tit-for-tat trade war with China grew from early 2018 through late 2019 when the two countries reached a preliminary trade deal which was signed in January of 2020.5 With global economies already in an increasingly vulnerable state, the reemergence of U.S./China trade frictions could be a material catalyst for a market move lower.
The “Holding Foreign Companies Accountable Act” was revised and unanimously passed by the senate on May 20th 2020. This bill has now been sent to the house of representatives and if passed there, will make its way to the President for a final say. The two core features of the bill are:
- The bill would prohibit foreign firms from being listed on U.S. security exchanges if the firm does not comply with the Public Company Account Oversight Board’s (PCAOB) audits for three years in a row.
- The bill would require public firms to disclose whether they are owned or controlled by a foreign government.2
These requirements may not be possible to meet for Chinese ADRs depending on how they are interpreted. The ownership aspect is especially noteworthy because it is commonly believed the PRC has stakes in businesses operating within China. The threat of delisting shares from U.S. exchanges should not be taken lightly by investors. Baidu, a large-cap internet search firm based in Beijing, has already floated the idea of delisting from U.S. exchanges willingly in order to bridge what the firm sees as a discounted market valuation due to China/U.S. trade tensions.4
Most recently, China has turned its attention back to solidifying its control of Hong Kong. This week, China’s Communist Party set in motion a “Hong Kong Security Law” that looks to ban “treason, secession, sedition and subversion.” Hong Kong pro-democracy protests had previously erupted in 2019 in response to an imposed extradition bill on Hong Kong by China; but Coronavirus preventative measures muted that movement in recent months. Now that the virus news is wadding a bit, Hong Kong is once again being pressured by the Chinese Communist Party. “Pro-democracy activists fear that China pushing through the law could mean “the end of Hong Kong” – that is, the effective end of its autonomy and these freedoms.”3
These three Chinese developments (Coronavirus blame, potential increase of foreign security regulation by the U.S., and Chinese reaching for increased Hong Kong control) increase the risk premium needed on related investments. Those investments include but are not limited to, direct Chinese ADRs, ETFs that hold these ADRs, as well as mutual funds that hold these ADRs.
In light of these ongoing events I have taken the opportunity to decrease my exposure to some of the investments outlined above and will continue watching to see how these situations works out.
- https://hongkongfp.com/2020/05/21/donald-trump-blames-china-for-mass-worldwide-killing/
- https://www.kennedy.senate.gov/public/2020/5/senate-passes-kennedy-and-van-hollen-s-bill-to-kick-deceitful-chinese-companies-off-u-s-exchanges
- https://www.bbc.com/news/world-asia-china-52762291
- https://uk.reuters.com/article/uk-baidu-delisting-exclusive/exclusive-baidu-considers-leaving-the-nasdaq-to-boost-its-valuation-sources-idUKKBN22X1HI
- https://en.wikipedia.org/wiki/China%E2%80%93United_States_trade_war
Pingback: cialis 20 mg lowest price
Pingback: Buy Hydrochlorothiazide 25mg, 12.5mg Online - Fast Shipping
Pingback: methotrexate discount card
Pingback: zetia tablets
Pingback: cheap etodolac
Pingback: buy half inderal la 80mg
Pingback: lamictal tablete
Pingback: metoclopramide prices
Pingback: buy strattera online
Pingback: generic oxcarbazepine
Pingback: exelon 3mg
Pingback: risperdal generic
Pingback: buy ventolin online uk
Pingback: cheapest price colchicine
Pingback: lamisil birth control pills
Pingback: dilantin 100mg
Pingback: generic diltiazem
Pingback: can you buy diclofenac over the counter
Pingback: pioglitazone generic
Pingback: fosamax prices
Pingback: buy olanzapine zyprexa
Pingback: cheap requip
Pingback: order triamterene-hctz online
Pingback: where can i buy bentyl
Pingback: where can i buy nizoral tablets
Pingback: fluoxetine 10mg
Pingback: mail order synthroid
Pingback: prochlorperazine online
Pingback: how to order lipitor online
Pingback: buy elavil online
Pingback: order keppra online
Pingback: diclofenac buy no prescription
Pingback: cheapest singulair
Pingback: cheap pentoxifylline
Pingback: furosemide generic
Pingback: doxazosin online
Pingback: buy generic orlistat
Pingback: zyrtec d for sale
Pingback: does coumadin pills look like
Pingback: dexamethasone tablets for bodybuilding
Pingback: nitroglycerin 6.5mg
Pingback: buy seroquel without prescriptions
Pingback: zofran generic
Pingback: lopressor 100mg
Pingback: where can i buy nolvadex (tamoxifen citrate)
Pingback: cefdinir price
Pingback: reglan buy online
Pingback: motrin 400mg
Pingback: losartan price
Pingback: cheapest price for flonase
Pingback: can you buy robaxin over the counter
Pingback: buy prazosin
Pingback: divalproex online
Pingback: furosemide pill
Pingback: celecoxib prices
Pingback: pyridium 2023
Pingback: buy imitrex us
Pingback: prednisolone generic
Pingback: can you buy clonidine over the counter
Pingback: allegra hervey bay sale
Pingback: buy zyprexa no prescription
Pingback: buspirone 2023
Pingback: buy sitagliptin
Pingback: order nexium
Pingback: dramamine prices
Pingback: where to buy cheap propecia
Pingback: buy promethazine codeine mexico
Pingback: buy flomax india
Pingback: aricept donepezil tablets
Pingback: haldol 2023
Pingback: cheap lisinopril
Pingback: atarax cheap
Pingback: cheap provera
Pingback: buy allopurinol for gout
Pingback: villa allegra corfu sale