China’s largest restaurant company Yum China faced a sell-off in its stocks for another day on Friday, March 11, after a delisting warning from US regulators the previous day.

Yum China saw its Hong Kong-listed stocks drop 10.2% in morning trade after losing 11% of its market value in New York.

It was one among the 5 Chinese companies that the US Securities and Exchange Commission (SEC) on March 10 announced that they would face delisting from the New York stock and Nasdaq exchange for failing to submit proper documents for inspection.

According to the Financial Times, at the end of February, Yum China alerted that it could be delisted from the NYSE in early 2024 due to “factors outside of our control, including the approval of Chinese authorities.” On the open market, the company is worth 21 billion dollars.

All five companies’ shares fell following the SEC’s notice. Yum China itself fell by 15%. ACM Research plummeted 27%, HutchMed downed 8%, and Zai Lab dropped by 9%.

The five companies have until March 29 to present proof disputing their financial statements to the SEC.

This event was part of the protracted audit standoff between China and the US. The Chinese government has barred domestic corporations and their Chinese auditors from complying with such requests from foreign authorities.

An analyst at China Renaissance, Bruce Pang noted with Reuters that the five Chinese companies were “the first few companies that already filed their 2021 annual reports with revised Forms 20-F, 40-F, 10-K, and N-CSR to meet HFCAA’s disclosure and submission requirements.” This has made them the first round of firms scrutinized by the SEC.

Responding to the SEC’s list, China’s securities regulator on Friday said they were negotiating with US officials and were making “positive progress.”

BeiGene, Zai Lab, and ACM Research said they were trying to comply with the regulations and intend to keep their listings. Yum China and HutchMed haven’t commented on the issue.

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