US China financial market decoupling

The global financial market is going to breakdown into two parts. The Western sphere and the East Asia sphere.

On 20 May 2020. The US Senate passed legislation that could disqualify many Chinese companies from listing shares on US Stock exchanges. Currently, there are 165 Chinese companies that are listed on US stock exchanges.

The bill requires companies seeking access to the US stock market are not owned or controlled by a government. The bill also requires companies to submit audits for inspection by the Public Company Accounting Oversight Board.

Just a week ago, the US had put a freeze on US pension funds to invest in Chinese companies. Hence, we could say the tension between the US and China had escalated from technology restriction to trade war and now the financial war.

Here are some of the consequences that could likely to happen after this new bill.

1) Chinese start-up may not be able to raise any funds from US venture capital funds or private equity fund anymore as exiting via a listing on US stock exchanges is no longer available.

2) US investors are going to miss the largest fast-growing economy in the world

3) China SSE Star Exchange will gain more momentum as Chinese companies looking to list their company locally.

4) Due to the collaboration between HKeX and SSE, the importance of HKeX will increase significantly as it is the major gateway for foreign investors to gain exposure to China growing economy.

5) The global financial market is breaking down into two parts into the Western sphere and the East Asia sphere. This will be followed by the reshuffling or global supply chain.

In short, the experiences and knowledge we had been applying are going to obsolete and we need to start exploring what the new world could be.

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