China state-owned airlines to delist in New York, joining exodus

TWO of China’s largest stated owned airlines said they would give up their New York stock exchange listings, joining a raft of government controlled firms that announced their departures from US bourses last year.

China Eastern Airlines and China Southern Airlines stated in separate filings on Friday (Jan 13) their intentions to apply to voluntarily delist their American depositary shares listed on the New York Stock Exchange. The companies attributed the decision to commercial factors, including the costs of maintaining a US listing despite the smaller number of shares and trading volumes in the US relative to those in Hong Kong.

The delistings have occurred despite US officials signaling a breakthrough last month in a long-running spat with China over access to audit papers, reducing the threat of forced delisting for Chinese firms.

The Public Company Accounting Oversight Board said in December that the US regulator’s inspectors have been able to sufficiently review audit documents from firms based in the two jurisdictions, progress which was applauded by Chinese regulators.

Analysts previously anticipated that state-backed airlines would be next to depart from US exchanges, following similar decisions from China Life Insurance, Petrochina and three other state owned giants in August.

Both China Eastern and China Southern are controlled by the Assets Supervision and Administration Commission of the State Council (SASAC), the same entity that oversees the firms that delisted last year. The carriers were among the Chinese companies identified by the US Securities and Exchange Commission as potentially facing delisting in 2024.

The airlines believe that their listings in Hong Kong and Shanghai are sufficient alternatives for their future financing needs, while their ADR listing has never been used for follow-on financing, their filings said.

Guangzhou-based China Southern has gained about 33 per cent in New York since November while its shares are up 42 per cent for the same period in Hong Kong. China Eastern has climbed about 30 per cent in both markets.

Any losses from such announcements are likely to be short-lived, if their peers’ experiences are any indication. Petrochina’s shares have gained 11 per cent in Hong Kong since giving notice of its delisting five months ago, while shares of Semiconductor Manufacturing International have doubled since the state-owned giant decided to take its shares off the US market back in May 2019.