Goldman Sachs: US$370 billion in Chinese firms' ADRs at risk if US severs market ties
US individuals are more likely than institutional investors to sell American depositary receipts (ADRs) of Chinese companies if the Trump administration pursues a decoupling of the world's two biggest stock markets, according to Goldman Sachs.
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American retail traders held about US$370 billion worth of ADRs, the US investment bank said in a report on Wednesday, basing the figure on subtracting strategic and institutional holdings from these companies' total outstanding shares.
Companies with high retail exposure, such as Alibaba Group Holding at 40 per cent, would be more susceptible to sell-offs if they are forced to delist, analysts led by Kinger Lau and Timothy Moe said.
Delisting risk for Chinese companies is resurging amid the escalating trade confrontation between China and the US. Goldman said in a separate report this week that a financial decoupling could lead to a
US$2.5 trillion sell-off in stocks and bonds in the Chinese and US markets.
'Some US retail investors may be reluctant or unable to convert their ADRs into [underlying Hong Kong-listed] shares,' Goldman said.
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US institutional investors were estimated to hold a combined US$830 billion of holdings across ADRs, Chinese stocks trading in Hong Kong (known as H shares) and China's yuan-traded onshore shares, Goldman said. That number rises to US$960 billion if Hong Kong-domiciled companies are considered.
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