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US investors in Chinese companies are stuck in zombieland: US investors are increasingly unable to repatriate returns in what the New York Times refers to as the Chinese version of “zombie” companies. Like TikTok parent company ByteDance — where some USD 8 bn of capital is stuck — these are Chinese firms, often booming, that are caught in geopolitical crosshairs, preventing investors from receiving returns.
ICYMI- The US House of Representatives last week voted to give ByteDance six months to sell TikTok or face a ban in the US over concerns about the Chinese government’s access to US user data.
It’s much more complicated than it may seem: Export control rules on tech imposed by China in 2022 mean that even if TikTok gets sold, its recommendation algorithm — the app’s most valuable feature — is unlikely to be included in the sale. Buying TikTok without the algorithm would be akin to acquiring Hulu without the rights to its content, said Columbia Business School professor Jonathon Knee. “It’s not completely clear what you’re buying,” he explained.
Chinese companies aren’t as attractive as they once were: China’s regulatory crackdowns, coupled with falling company valuations triggered by the country’s economic slowdown, have made acquisitions less tempting for US buyers. Some 3.2k Chinese companies were acquired last year, half of what was bought in 2019.
And less Chinese companies are IPOing in the US: Chinese companies have grown wary of listing in the US since ride hailing app Didi delisted from the New York Stock Exchange in 2022 due to regulatory pressure by China. Only three Chinese startups listed in the US in 2022, down from 18 per year between 2018 and 2021.
THE MARKET THIS MORNING-
Asian markets are mixed and stock futures little changed in trading early this morning as traders take a breather ahead of fresh economic guidance from the US Federal Reserve this week.
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ADX |
9,221 |
-0.4% (YTD: -3.7%) |
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DFM |
4,262 |
-0.7% (YTD: +5.0%) |
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Nasdaq Dubai UAE20 |
3,702 |
-0.6% (YTD: -3.6%) |
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USD : AED CBUAE |
Buy 3.67 |
Sell 3.67 |
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EIBOR |
5.0% o/n |
5.4% 1 yr |
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TASI |
12,762 |
+0.3% (YTD: +6.6%) |
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EGX30 |
31,062 |
-0.8% (YTD: +24.8%) |
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S&P 500 |
5,117 |
-0.7% (YTD: -7.3%) |
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FTSE 100 |
7,727 |
-0.2% (YTD: -0.1%) |
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Euro Stoxx 50 |
4,986 |
-0.1% (YTD: +10.3%) |
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Brent crude |
USD 85.36 |
0.0% |
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Natural gas (Nymex) |
USD 1.70 |
-2.7% |
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Gold |
USD 2,155 |
0.0% |
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BTC |
USD 68,766 |
+3.3% (YTD: +62.0%) |
THE CLOSING BELL-
The ADX fell 0.4% yesterday on turnover of AED 1.3 bn. The index is down 3.7% YTD.
In the green: Ghitha Holding (+15.0%), Emirates Stallions Group (+7.0%) and Umm Al Qaiwain General Investment (+4.6%).
In the red: Palms Sports (-10.0%), Abu Dhabi Commercial Bank (-6.5%) and Rapco Investment (-4.5%).
Over on the DFM, the index closed down 0.7% on turnover of AED 739 mn. Meanwhile in Nasdaq Dubai the index fell 0.6%.
CORPORATE ACTIONS-
Budget carrier Air Arabia approved a final dividend payout of 20 fils per share for 2023, representing 20% of the bank’s net income, according to a DFM filing (pdf).
Healthcare services provider Burjeel Holdings has proposed a dividend payout of AED 65mn for its 2023 earnings, equivalent to one fils per share, according to an ADX disclosure (pdf).
Emaar Development’s board approved distributing AED 2.08 bn in cash dividends toshareholders, according to a DFM disclosure (pdf). This amount represents 52% of the share capital, equating to 52 fils per share.
