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Yum China shares tumble on US-China auditing dispute

shares tumble

Its Hong Kong-listed shares slid 10.2%, having closed 11% lower in New York

Shares in Yum China, and four other Chinese companies tumbled on Friday after they were ensnared in an auditing dispute between Beijing and Washington, though China’s securities regulator said it was confident they could reach a deal.

Yum China Holdings, the owner of KFC, Taco Bell and Pizza Hut restaurants in China, said it may have to delist from the New York stock exchange by 2024 after U.S. authorities said it had failed to provide access to audit documents.

Its Hong Kong-listed shares slid 10.2% in morning trade, having closed 11% lower in New York.

Washington is demanding complete access to the books of U.S-listed Chinese companies, but Beijing bars foreign inspection of working papers from local accounting firms – an auditing dispute that puts hundreds of billions of dollars of U.S. investments at stake.

In December, the U.S. Securities Exchange Commission said it had identified 273 companies that were at risk, without disclosing names. It named five of these firms including Yum China for the first time this week.

China’s securities regulator said on Friday it was confident it will reach an agreement with U.S. counterparts on securities supervision, and that talks between it, the Chinese finance ministry and the U.S. Public Company Accounting Oversight Board had made ‘positive progress’.

Among the other companies named is BeiGene Ltd, which said in a filing that it is seeking solutions. Beigene shares tumbled 7% in Hong Kong and 6% in New York.

We think the main reason the first batch of companies was identified by the SEC and included on its provisional list is because they are the first few companies that already filed their 2021 annual reports with revised Forms 20-F, 40-F, 10-K, and N-CSR to meet HFCAA’s disclosure and submission requirements, Bruce Pang, an analyst at China Renaissance, said.

Pang said: However, this list has returned delisting risk to the forefront, as regulators look to proceed step by step with stricter requirements on disclosure and compliance.

Also included are ACM Research Inc which said it is actively looking for solutions and Zai Lab Limited which said its inclusion ‘will not materially impact operations’.

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