Commentary on Political Economy

Friday 9 April 2021


Delisting leaves just 20 Chinese companies on ASX

The number of Chinese companies quoted on the ASX dwindled to just 20 this week after the latest delisting, as strict standards over the past four years have dissuaded businesses from tapping Australia’s equity market.

Eagle Health, a company selling throat lozenges and face masks, was delisted on Tuesday, removing one of the last Chinese companies to list on the ASX when it floated four years ago.

The company is the first locally listed Chinese business to fall from the market in six months and was dismissed by the ASX for failing to lodge audited financial statements.

Eagle Health said earlier this month the delay in publishing its results was due to disruptions caused by COVID-19 and was “greatly disappointed” the ASX would not grant the company an extension.

The delisting brings the number of Chinese companies quoted on the ASX to 20 from 55 at the end of November 2017, following stricter corporate governance requirements for emerging markets businesses that have disproportionately impacted companies from China.

The ejection removes a company that aimed to reset perceptions among investors of ASX-listed Chinese businesses and casts further doubt on Australia’s role as a source of equity capital for the world’s second largest economy.

Tod Hannington, a director of the company when it raised $25 million in its float four years ago, said at the time he hoped the business would improve the reputation of Chinese companies listed on the ASX.

“Over the next 12 months we have to prove to them that this is not the old way with Chinese companies,” Mr Hannington told The Australian Financial Review in 2017. “This is the new way.”

The company declined to comment.

Michael Beer, founder of Beer & Co, an investment advisory firm that worked on Eagle Health’s flotation, said the company had the brightest prospects among the Chinese businesses he has helped list.

“That was frankly the best Chinese float we did in the sense I thought their product range was excellent and we had some really good Australian directors,” he said.

“But, like all the others I’ve been associated with, the Chinese owners tend to fall out of love with the Australian directors,” Mr Beer said.

Eagle Health even hired a former federal health minister, Andrew Thomson, a fluent mandarin speaker, as its chairman, a role he relinquished in 2019.

The company last year announced a sudden pivot into manufacturing face masks in the early weeks of the pandemic when a global rush to purchase the protective gear squeezed supply.

The wave of delistings has curtailed Australia’s role as one of the most popular sources of equity capital for Chinese businesses over the past two decades. Australia has trailed only Singapore in the region in attracting Chinese listings since 2000 and remains fourth globally, according to data from Dealogic.

The ASX crackdown on listing standards presaged a similar move over the past two years in the US, the biggest source of equity capital for Chinese companies outside of China.

Listings in the US fell in 2019 but bounced back last year with a record 36 floating through the chaos of the pandemic, helping push the number of Chinese listings to a record 520 for the year, according to Dealogic.

The fall in local listings of Chinese companies has come against the backdrop of mounting tensions between the two countries, which intensified last year when the Australian government asked for an inquiry into the origins of the pandemic.

China has since slapped tariffs on imports from Australia including wine, barley and timber, although Chinese demand for iron ore has buoyed trade trade between the two countries over the past year.

“I don’t think the average mum and dad investor in Australia would be keen to invest in Chinese stocks while the relationship between the Chinese and the Australian government is in a difficult space,” said John Cowling, chief executive of the Australian Shareholders’ Association.

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