Huang Fan: There has been a long-standing disagreement between China and the United States on the issue of auditing and supervision of Chinese concept stocks, and now the agreement has finally been reached, reflecting the consensus and pragmatism of both sides on the principle of "cooperation for mutual benefit". What investment opportunities does this mean for Hong Kong stocks?
Recently, official domestic media saw a statement announcing that the China Securities Regulatory Commission and the Ministry of Finance of the People's Republic of China8month26Japan and the Public Company Accounting Oversight Board of the United States（PCAOB）Sign an audit supervision cooperation agreement and will initiate relevant cooperation in the near future. According to the China Securities Regulatory Commission's Q&A statement, the Sino US Audit Supervision Cooperation Agreement signed this time stipulates important matters such as the purpose, scope, form, use of information, and specific data protection of cooperation. The cooperation agreement includes the following key contents: One is to establish the principle of reciprocity. The terms of the agreement are equally binding on both parties. Both China and the United States may conduct inspections and investigations of relevant law firms in the jurisdiction of the other party in accordance with their legal responsibilities, and the requested party shall do its best to provide sufficient assistance within the scope permitted by law. The second is to clarify the scope of cooperation. The scope of the cooperation agreement includes assisting the other party in conducting inspections and investigations of relevant law firms. Among them, the scope of assistance provided by the Chinese side also involves some Hong Kong firms that provide audit services for China Concept Equity, and the audit papers are stored in mainland China. The third is to clarify the mode of collaboration. Both parties will communicate and coordinate in advance on the inspection and investigation activity plan. The US side must obtain audit papers and other documents through the Chinese regulatory authorities, and conduct interviews and inquiries with relevant personnel of the accounting firm with the participation and assistance of the Chinese side. The signing of the Sino US Audit Supervision Cooperation Agreement marks a crucial step towards strengthening cooperation to address the issue of audit supervision in China's concept stocks, which is in line with market expectations and expectations. The next step is for both parties to conduct daily inspections and investigations in cooperation with relevant accounting firms according to the cooperation agreement, and to objectively evaluate the effectiveness of the cooperation. If subsequent cooperation can meet their respective regulatory needs, it is expected to solve the issue of auditing and supervision of Chinese concept stocks, thereby avoiding passive delisting from the United States. We look forward to actively promoting cooperation with the US regulatory authorities with a professional and pragmatic attitude, and working together to achieve positive results. As a result, the US listed Chinese concept stocks, which have been facing significant uncertainty of being delisted and delisted, finally have a stable and clear prospect. Why is there a dispute between Chinese and American regulators regarding the "audit manuscript"? 2000Around the year, there were scandals of fraud and financial fraud by several listed companies in the US capital market. In order to protect investor interests and restore investor confidence, the US Congress requiresPCAOBSupervise the authenticity and accuracy of information disclosure in audit reports of listed companies in the US capital market. Due to the fact that many foreign companies are listed in the United States, the audit services provided to these foreign issuers are mostly provided by the accounting firms in their respective countries. Sarbanes-Oxley Act2002》Foreign firms that provide audit reports for listed companies are required to comply with the same compliance requirements as domestic firms in the United States. 2021year12month2In order to implement the legislative requirements of the Foreign Company Accountability Act, the United States Securities and Exchange Commission (SEC)“SEC”）The implementation rules have been announced (hereinafter referred to as the "Implementation Rules"). 2021year12Month,PCAOBRelease the Report on the Recognition of the Foreign Company Accountability Law, recognizing60Yu Family Registered Chinese Accounting Firm in the United States "Unable to Complete Inspection or Investigation" 。 The dispute over the "audit manuscript" between China and the United States has sparked investor panic, and Chinese concept stocks listed in the United States have embarked on a long-term downward journey. 2021year6month22On the day, the US Senate passed the Accelerated Foreign Company Accountability Act. If the bill is passed and signed into law by the US House of Representatives, it will reduce the number of consecutive non inspection years required to trigger prohibitions under the Accountability Act from three years to two years. in other words,2022year3-5During the month, it was approved by the US Securities and Exchange CommissionSECThe identified Chinese concept companies need to be listed in the2023Annual submission2022Starting from the annual report, relevant disclosures should be strengthened and2024Annual submission2023Resolve the issue of audit manuscript inspection rights before the annual report, otherwise there is a risk of prohibited transactions and delisting. As of this year7At the end of the month, there are already159Listed as a family equity company"Pre delisting"On the list. Overseas institutional investors have listed Chinese concept stocks as "non investable", causing the stock prices of Chinese concept stocks listed in the United States to plummet, coupled with the continued weakness of closely related Hong Kong stocks. To be fair, Chinese concept listed companies have raised a large amount of funds on the US stock market. From the perspective of protecting investors' interests, US regulations require the right to review the audit papers of these listed companies, with the aim of preventing financial fraud and fraud. In fact, it is understandable - as the saying goes, "If you take our money, we need to look at your account books. This is a matter of smooth completion. Of course, there are also reasons in China that some listed companies' data contains state secrets and cannot be disclosed to foreign regulators. The reasonable solution is that these companies that contain state confidential data should not go public overseas for financing, and the audit manuscript verification of companies that do not involve state confidential data should be conducted in a way recognized and accepted by both China and the United States. in fact,2022year4month2On the th, the China Securities Regulatory Commission, in conjunction with the Ministry of Finance, the State Administration of Confidentiality, and the State Archives and Records Administration, publicly solicited opinions from the public on the "Regulations on Strengthening the Confidentiality and Archives Management of Overseas Securities Issuance and Listing of Domestic Enterprises (Draft for Soliciting Opinions)" (hereinafter referred to as the "Draft for Soliciting Opinions") for revision2009The Regulations on Strengthening the Confidentiality and Archive Management of Securities Issuance and Listing Abroad promulgated in“《2009Regulations. The 'Soliciting Opinions' has been deleted《2009The statement in the "Regulations" that "on-site inspections should be mainly conducted by China's regulatory agencies, or rely on the inspection results of China's regulatory agencies", Revised to Article 11 of the Draft for Soliciting Opinions If overseas securities regulatory agencies and relevant regulatory authorities propose to conduct investigations, evidence collection, or inspections on domestic enterprises and securities companies and service institutions providing securities services for overseas issuance and listing of domestic enterprises, they shall conduct such investigations through cross-border regulatory cooperation mechanisms, and the China Securities Regulatory Commission or relevant regulatory authorities shall provide necessary assistance in accordance with the bilateral and multilateral cooperation mechanisms Domestic enterprises, securities companies, and securities service institutions shall report to the China Securities Regulatory Commission or relevant regulatory authorities in advance before cooperating with overseas securities regulatory agencies or relevant regulatory authorities to investigate, inspect, or provide documents and materials According to this provision, overseas regulatory agencies, such asPCAOBIf investigation and evidence collection or inspection are to be carried out on the auditors of the Chinese concept stocks, it should be carried out through cross-border regulatory cooperation mechanisms, and the China Securities Regulatory Commission or relevant regulatory authorities should provide necessary assistance. This article is seen as a response to the requirements of the Foreign Company Accountability Act of the United States regarding the Accounting Oversight Committee for Listed Companies in the United States (hereinafter referred to as the "Foreign Company Accountability Act")“PCAOB”）It is necessary to review a response to the audit manuscript of the Chinese concept stock company and prepare for the subsequent agreement between the two parties. Although there has been a long-standing disagreement between China and the United States on the issue of auditing and supervision of Chinese concept stocks, the recent intensification of political games between China and the United States has also raised concerns among investors about the regulatory ability of both sides to resolve disputes. Now that the agreement has finally been reached, it reflects the consensus and pragmatism of both sides on the principle of "cooperation benefits both sides". For the Chinese side, the agreement laid the foundation for avoiding the passive delisting of Chinese concept companies. For the US side, the internationalization status of the US stock market has been consolidated. As of this year3Month, total261Chinese companies listed in the United States with a total market value of approximately1.3Trillion US dollars. If Wall Street retains the majority of Chinese concept stocks, it will be beneficial to maintain the breadth and depth of the US capital market. I have no intention of continuing to delve into the game between China and the United States and its long-term effects. I just hope to discuss the investment opportunities in Hong Kong stocks regarding the agreement on regulatory auditing between China and the United States. The sluggish Hong Kong stock market has been weak for a long time,2021In the year, the global market surged, with only Hong Kong stocks silently performing at the bottom of the world. Since the beginning of this year, it has taken another step forward, not only due to the uncontrollable continuous interest rate hikes by the Federal Reserve, but also due to: 1The Russia-Ukraine conflict, the Sino US game and other geopolitical issues have affected the sentiment of international investors and made them choose to sell. International investors still play an important role in Hong Kong shares, and domestic funds can not be replenished for the time being; 2Due to the reasons analyzed earlier in the article, the continuous sharp decline of Chinese concept stocks listed in the United States has dragged down Hong Kong stocks. A large number of second listed companies in Chinese concept stocks listed in the United States have been included in the Hang Seng Index, resulting in a more obvious transmission effect of downward pressure on Hong Kong stocks from Chinese concept stocks in the United States; 3The growth of the mainland economy continues to slow down due to the impact of epidemic prevention regulations, and the operating performance of listed companies in China is under pressure. In the Hong Kong stock market, listed companies registered in mainland China and those registered overseas with their main business in mainland China are increasingly dominant. The Hong Kong stock market is precisely a barometer of the economic and business trends in mainland China. On the surface, it seems like all the bad news. However, global investment guru Warren Buffett once said, 'There is no good news in the capital market', which is the best news in itself. Because everything has become very cheap. Investing in stocks means buying a listed company. If a good company is cheaper, it is a great investment. Let's take a look at the current valuation of Hong Kong stocks as follows:
The valuation of Hang Seng Index since this century (based on the data of Yiniu.com) It is easy to see from the above figure that the current valuation of Hang Seng Index represents the overall level of Hong Kong stocks11Times, basically the bottom area of history, the current dividend yield of dividends3.13%It is much higher than the return on bank fixed deposits. If we carefully select more, we can further identify a large number of good companies with high long-term cash dividends and stable growth in operating performance. If we can invest in a basket of excellent listed companies, within a few years, we can recover the investment cost by relying on the company's dividend payout. So, in the face of big country games and slowing economic growth, we can also obtain reasonable investment returns. There's really nothing to worry about. Regarding the game between major powers, from the basic resolution of regulatory disputes between China and the United States mentioned above, we can also see the pragmatic and rational efforts of both sides to solve the problem. Amidst the controversy and noise between both parties, the market has instead given us an opportunity to buy a good company at a cheap price. For the slowdown in economic growth, economic laws tell us that in a market economy environment, there is no permanent prosperity or permanent recession; There is only eternal cycle reincarnation. We have no reason to believe that the domestic economic growth rate will continue to decline, and we should not expect the capital market to remain sluggish.
Valuation of Tencent since its listing (based on data from Yiniu.com) From the above figure, as a representative of the domestic new economy, Tencent, the leading company in the internet industry, currently has a valuation of only10Double the lead, setting a new low since its listing. It's really cheap enough. Although the exact bottom position of the market has never been accurately predicted by anyone, judging from the overall valuation being at a historical low and the principle that extreme things must turn around, the current Hong Kong stock market should not be far from the bottom. From an investment perspective, the emergence of various' crises' means the emergence of opportunities. The key is whether investors are willing to grasp? Note: This article only represents the author's personal viewpoint |
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