According to Jack Siu, an expert on Greater China at Credit Suisse, investors should reduce their share of Chinese stocks that are traded on American stock exchanges, given the increased regulatory risks in China.
"In general, uncertainty regarding regulation will support high risks for investors in the next 12-18 months. Therefore, the holders of these shares should consider diversifying, hedging their risks," Siu said.
Last year, China unexpectedly announced stricter rules on Chinese stocks traded on U.S. stock exchanges, which hit many sectors, especially the technology sector. Meanwhile, last week, the Chinese giant Didi announced that it will leave the American stock exchange and hold a listing in Hong Kong.
Jack Siu said that the adoption of further regulatory measures by the Chinese authorities is not excluded.
Meanwhile, the U.S. Securities and Exchange Commission has finalized rules allowing the regulatory body to delist foreign shares if companies do not meet audit requirements. In recent years, an increasing number of U.S.-listed Chinese companies have sought a double listing on the Hong Kong Stock Exchange, with the most famous being Alibaba and JD.com, as well as Weibo.
Jack Siu noted that uncertainty regarding regulation by the Chinese authorities may persist until March 2022, so it is necessary to delay investing in Chinese stocks.