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Investors are breathing a sigh of relief after regulators in Beijing extended an olive branch to the United States, indicating they could change their policies so that Chinese companies could avoid getting kicked off Wall Street.
What’s happening: Shares of tech giant Alibaba (BABA) in New York rallied almost 7% on Monday. E-commerce platforms Pinduoduo (PDD) and JD.com (JD) leaped 16% and 7%, respectively.
But the celebration may have been a bit premature, as negotiators from the United States and China continue to hammer out the details and tensions between the world’s two largest economies simmer beneath the surface.
“The policy is still evolving, and there’s still a lot of uncertainty,” Xiaomeng Lu of the consultancy Eurasia Group told me.
Over the weekend, the China Securities Regulatory Commission, the country’s top securities watchdog, proposed changing a decade-old rule that forbids Chinese firms from sharing sensitive data and financial information with overseas regulators.
Remember: US regulators have long complained that they can’t access the books of Chinese companies. In 2020, the Holding Foreign Companies Accountable Act was signed into law, giving the Securities and Exchange Commission power to kick foreign companies off Wall Street if they fail to allow US regulators to review their audits for three straight years.
But Beijing, citing national security concerns, has been resistant to overhauling its policies. It requires companies that are traded overseas to hold their audits in mainland China, where they cannot be examined by foreign agencies.
The new amendment might finally allow US regulators to dig into these contested materials. If that helps resolve the dispute, it could ease a huge source of concern for the more than 200 Chinese firms listed in the United States, which have been battered over the last year.
But it’s too soon to say for sure. It’s not clear if US regulators will see the potential changes as sufficient. Last week, SEC Chair Gary Gensler poured cold water on the idea that a deal was imminent.
“There have been thoughtful, respectful, productive conversations, but I don’t know where this is going to end up,” Gensler said. “It’s up to the Chinese authorities, and it could be frankly a hard set of choices for them.”
Another sticking point, according to Lu, is whether there is a carve-out for companies that have access to sensitive data about the Chinese government or infrastructure.
The “only clear data point we have so far,” she emphasized, is Didi. The ride-hailing service had to begin delisting from New York shortly after its initial public offering last year. Beijing launched a crackdown on the company, saying its app broke privacy laws and posed cybersecurity risks.
What comes next: Lu said she sees a roughly 70% chance that some kind of deal between Washington and Beijing is reached this year. But she still thinks it’s likely that some Chinese firms will need to delist from Wall Street at that point.
She noted that Alibaba isn’t just an online marketplace, but also a cloud business. If it provides services to state-owned enterprises, Chinese regulators may still want it to keep its books private.
It’s not every day that the uber-rich CEO of one of America’s top companies takes a huge stake in a totally different business. But that’s exactly what the ever-unpredictable Elon Musk has done.
The latest: The Tesla (TSLA) chief revealed a 9% stake in Twitter (TWTR) on Monday, sending shares of the social media platform surging 27%.
The investment — which was valued at almost $3.7 billion when the market closed — makes him Twitter’s biggest shareholder.
Musk didn’t disclose the purpose of the purchase or any plans for the company. But that hasn’t stopped speculation about what drove the surprise move.
Analysts expect Musk, who has been a vocal critic of Twitter policies, to actively push for changes to how the company operates. Last month, he said he was giving “serious thought” to creating a new social media platform.
“Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy,” Musk recently tweeted. “What should be done?”
He’s also suggested (by tweeting a meme, of course) that he does not support CEO Parag Agrawal, who recently took over from Jack Dorsey.
“Musk has already indicated that he did not agree with the appointment of Agrawal and that he desires some changes,” Morningstar analyst Ali Mogharabi said in a note to clients.
First order of business: After his stake was disclosed, Musk tweeted a poll asking whether Twitter users wanted an edit button.
But some suspect he could agitate for even bigger shifts at the company. There’s speculation Musk could partner with other activist investors, or even create a consortium to take Twitter private. The company is worth $40 billion. That’s a fraction of rival Meta, which has a market value of $637 billion.
Starbucks (SBUX) made waves with its decision this week to pause share buybacks, the first big move Howard Schultz made following his return as CEO.
Could the world’s biggest oil companies be next? That’s what top Democrats in the House of Representatives are hoping for.
House Oversight Chairwoman Carolyn Maloney and Rep. Ro Khanna, chair of the environment subcommittee, wants ExxonMobil (XOM), Chevron (CVX), BP (BP) and Shell (RDSA) to scrap stock buyback programs and dividends during the war in Ukraine and put that money toward lowering prices at the gas-pump.
“Fossil fuel companies are taking advantage of the crisis by raking in record profits and spending billions of dollars to enrich their executives and investors,” they wrote in a letter dated Monday.
The lawmakers also urged the oil companies to make “meaningful investments” in solar, wind and other forms of clean energy to address the climate crisis.
Oil companies—which are cashing in on soaring energy prices—have faced sustained calls to use spare cash to offset the pain for everyday consumers. In the United States and United Kingdom, there have been calls for a temporary “windfall tax” on their earnings to help households cover energy bills.
Coming up: The issue is likely to feature in a House hearing on Wednesday, where executives from BP, Exxon, Chevron and Shell are scheduled to testify.
The ISM Non-Manufacturing Index, which tracks the US services sector, arrives at 10 am ET.
Coming tomorrow: Investors will scrutinize minutes from the Federal Reserve’s latest meeting for signs of how aggressive the central bank could be later this year.