Trump considering delisting Chinese companies from U.S. stock exchanges

President Donald Trump's administration is considering the possibility of delisting Chinese companies from U.S. stock exchanges, a source briefed on the matter said on Friday, in what would be a radical escalation of trade tensions between the two countries.

The move would be part of a broader effort to limit U.S. investments into China, the source said, confirming an earlier report by Bloomberg that sent shockwaves through financial markets.

Shares of Alibaba Group Holding, JD.com, Pinduoduo, Baidu, Vipshop Holdings, Baozun and IQIYI fell between 2 per cent to 4 per cent in afternoon trading.

China's yuan currency, traded in off shore markets, fell by 0.4 per cent against the dollar after the news to trade near its weakest against the greenback in about three weeks.

Exact mechanisms for how to delist the companies were yet to be worked out and any plan is subject to approval by President Donald Trump, who has given the green light to the discussion, Bloomberg reported citing a person close to the deliberations.

Officials are also examining how the U.S. could put limits on the Chinese companies included in stock indexes managed by U.S. firms, although it was not clear how that would be done, the agency cited three sources as saying.

A bipartisan group of U.S. lawmakers in June introduced a bill to force Chinese companies listed on American stock exchanges to submit to regulatory oversight, including providing access to audits or face delisting.

Chinese authorities have long been reluctant to allow overseas regulators to inspect local accounting firms - including member firms of the Big Four international accounting networks — citing national security concerns.

As of February, there were 156 Chinese companies listed on the NASDAQ and New York Stock Exchanges, according to government data, including at least 11 state-owned firms. 

NYSE declined to comment on Friday while Nasdaq, MSCI, S&P and FTSE Russell all did not immediately respond to requests for comment.

Escalation tactic

Trade talks between the United States and China are expected to resume next month after months of tit-for-tat moves by both sides which have weakened global growth and driven rollercoaster moves in markets.

"It's all very disruptive, it just adds to uncertainty and its a big negative for business investment," said Scott Brown, chief economist at investment bank Raymond James. He noted, however, that both sides have tended to use aggressive moves in the past as leverage ahead of talks.

"You never know if its a ploy to get some leverage," he said.

Trump on Tuesday delivered a stinging rebuke to Beijing's trade practices in a speech at the United Nations before a day later stoking hopes that the nearly 15-month standoff could be nearing an end.

"They want to make a deal very badly... It could happen sooner than you think," he told reporters in New York on Wednesday.

The reports on Friday knocked around half a percent off the value of the S&P 500 and reduced the value of the largest U.S. exchange-traded fund tracking Chinese stocks, the iShares China Large-Cap ETF, by more than 1.4 per cent.