Diversification is a wonderful thing until it is not. A month or so ago, China which has the second biggest economy in the world and 270 Chinese companies have a listing on US exchanges. For many people and institutions, the joint listing were both a good method to invest in China and provide diversification. It worked well as Chinese companies made money in the Chinese marketplace in the global marketplace. Then the regulators made noises.
In an article from Reuters, China has proposed revising confidentiality rules involved in offshore listings, removing a legal hurdle to Sino-US co-operation on audit oversight while putting the onus on Chinese companies to protect state secrets.
The US and China have a long running audit dispute and Washington put a line in the sand to fix the issue or delist from US exchanges in 2024. The big issue is who could conduct on-site inspections of Chinese companies – China said Chinese regulators, the US said US regulators.
The Chinese Regulatory Commission (CSR) will facilitate cross border regulatory co-operation including joint inspections which will safeguard interest of global investors.
In mid March, Vice Premier Lin He said talks between the regulators were making progress. (some issues go to the highest levels of government).
Linking to dividend paying stocks, one of the reasons, but not the only reason investors in invest on the stock exchange is because of the rules behind the scenes in the markets. Many believe the western countries stock exchanges have greater regulation which makes the rules reasonable for all investors. On some exchanges the rules are written down but not enforced which makes investor beware. If things go well and the investor makes money, the regulations are less important. If the investor loses money because the system seems rigged, then investor beware and it is better to go to more regulated exchanges.
There are more questions than answers, till the next time – to raising questions.