The turbulence in the Shanghai stock market is causing Chinese companies listed on U.S. exchanges to think twice before moving their tickers back to mainland China, said Drew Bernstein, co-managing director of tax and advisory firm Marcum Bernstein & Pinchuk. ‘There’s about 20 companies right now that have announced plans to delist from the United States and relist in China,’ said Bernstein. ‘Those companies are really going to have to take a look at the market right now because they are embarking on a process that could take two to three years to complete.’ The Chinese A-share market was up nearly 50% in early June before it plummeted, forcing the Chinese government to step in and stabilize the market through restrictions on short-selling and sales of certain stocks. Now the stocks listed on the Shanghai exchange and generally owned by Chinese citizens are barely up double digits for the year. The reason for the wild swing has less to do with stock fundamentals, than a newfound fascination with trading among the Chinese populace, according to Bernstein. ‘You have 10 million accounts that were opened, and of these 10 million accounts, two thirds of these people never finished junior high school and 6% of them are considered illiterate,’ said Bernstein. ‘So you had this herd mentality in trading similar to what you see in penny stocks. They were trading on what they considered to be insider information and they are not reading financial statements.’
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