Alibaba (NYSE: BABA), JD.com (JD), DiDi Global (DIDI) and several other Chinese tech companies listed on US exchanges soared on Friday after Bloomberg reported that Chinese authorities were making plans to give US auditors full access to the firms’ audit reports as soon as the middle of this year.
The news outlet reported that the China Securities Regulatory Commission and other regulators are working on creating a framework that would let Chinese firms keep their US listings. However, some state-owned enterprises and private companies that have “sensitive” data are likely to be delisted, Bloomberg added, citing people familiar with the process.
Alibaba (BABA) shares soared more than 6% to $ 115.68 in early trading. JD.com (JD) gained more than 3% to $ 60.12while Baidu rose nearly 8% to $ 141.78.
Other stocks, such as DiDi Global (DIDI) jumped more than 20% to $ 3.03while Pinduoduo (PDD), Kingsoft Cloud (KC), Huya (HUYA), DouYu (DOYU), Dada Nexus (DADA), Baozun (BZUN), Bilibili (BILI), KE Holdings (BEKE), Joyy (YY), NetEase (NTES), Zhihu (ZH), Trip.com Group (TCOM), iQIYI (IQ), Hello Group (MOMO), Vipshop (VIPS) and Dingdong (DDL) also moved sharply higher on Friday.
The move comes just days after the Chinese government reportedly told US-listed firms to prepare for more audit disclosures.
It also comes after the Chinese government said it would stabilize its markets and support economic growth, including the continued support for “various types of companies to list overseas.”
The framework would provide a plan on what type of data could cause national security concerns, including whether consumer information held by companies such as Alibaba (BABA) could fall into that bucket.
Earlier this week, Baidu (BIDU) was added to a list created by the Securities and Exchange Commission that it could possibly be delisted under the Holding Foreign Companies Accountable Act, or HFCAA. In response, Baidu said it was “actively exploring possible solutions.”
The HFCAA states that a company would be delisted from a US exchange if it was identified by the SEC for three consecutive years because of the Public Company Accounting Oversight Board’s inability to audit it properly.
SEC Chairman Gary Gensler recently toned down speculation of a potential imminent deal for Chinese companies to avoid delistings in the US, saying that conversations had been “thoughtful, respectful [and] productive, “but that he did not know what the talks would lead to.
On March 24, the Public Company Accounting Oversight Board told Seeking Alpha that it was not clear if Chinese authorities would agree to allow US inspectors to fully review audit papers of companies.
Last month, Alibaba (BABA) said it would enhance its buyback program to $ 25 billion, up from $ 15 billion to boost its share price.