U.S. Chinese stocks rise as delisting talks advance

(Bloomberg) — U.S.-listed Chinese stocks rose the most in more than two months as talks between the two countries to avoid delisting companies from the New York Stock Exchange intensified.

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China’s Nasdaq Golden Dragon jumped as much as 6.5 percent, the most since June. Bloomberg News reported that regulators in China have told accounting firms to be prepared to bring audit documentation for U.S.-listed Chinese companies to Hong Kong, where it can be reviewed by the U.S. Public Company Accounting Oversight Board, a body that asked not to be identified as the discussions are private. The

Shares of U.S.-listed tech giants including Alibaba Group Holding Ltd., JD.com Inc. and Pinduoduo Inc. all rose at least 9% on Thursday. Meanwhile, NetEase gained 5.1 percent, while electric vehicle maker Nio Inc. and Li Auto Inc. added 6.5% and 4.2% respectively.

The PCAOB declined to comment, while the China Securities Regulatory Commission and the US Securities and Exchange Commission did not immediately respond to requests for comment. The Wall Street Journal reported on this earlier.

“This is a fascinating development,” said Ed Moya, senior market analyst at Oanda Corp. “Official confirmation is needed, but expectations are growing that this will happen as both countries deal with economic instability,” he added.

Read more: US-China delisting talks advance with Hong Kong inspections

Such a move would be an important step toward easing fears of a mass forced removal of U.S.-listed Chinese stocks, something that has weighed on stocks for more than a year. Earlier this month, China Life Insurance Co., PetroChina Co. and China Petroleum & Chemical Corp. were among a group of state-owned companies that announced plans to delist from US exchanges. Dow Jones reported the news earlier.

The rally in US trade followed the best day in nearly four months for Hong Kong’s Hang Seng Tech Index, which rose 6% on Thursday. That helped drive the city’s benchmark Hang Seng Index up 3.6 percent, making it the best performer among Asia’s main equity gauges.

In addition to the Chinese government’s 1 trillion yuan ($146 billion) in support for the economy, traders pointed to short covering and adjusting positions ahead of Jackson Hole.

“Whether or not the audit deal rumor is true, Hong Kong shorts pushed their bets into a light summer band,” said Brendan Ahern, chief investment officer at Krane Fund Advisors LLC. “We braced ourselves for an epic short squeeze that is contributing to today’s move.”

Shares in Hong Kong fell to their lowest in months this week as global risk-averse sentiment prevailed ahead of the Federal Reserve’s meeting in Jackson Hole. Worries about China’s economic growth, with a deepening property crisis and power shortages caused by a severe drought, added to the gloom.

After three days of losses, the Hang Seng index also looked ripe for a recovery to some market watchers based on various technical indicators.

The gauge was near “oversold” levels in monthly measures of the relative strength index, approaching the 30 threshold never reached in data dating back to 1972. Morgan Stanley strategist Gilbert Wong said “the risk of a short contraction in China and Hong Kong stocks are rising.”

(Adds details throughout, quotes in ninth paragraph, updates prices.)

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