(Bloomberg) -- There’s a “real and rising risk” that the US Congress may force the country’s stock exchanges to delist some Chinese companies, according to TD Cowen.

A letter from 10 Republican lawmakers to Nasdaq Inc. Chief Executive Officer Adena Friedman on April 11 pressing her to explain why the bourse still lists firms on the Defense Department’s 1260H list of Chinese Military Companies “is a warning” about the risk, TD Cowen’s managing director for financial services Jaret Seiberg wrote in a note on Tuesday. It also suggests the broader efforts to kick out US-traded Chinese companies are far from over, he said. 

“This is an easy provision to include in any bill that looks like it will be enacted,” Seiberg said.

In the letter, the Republicans asked what policy Nasdaq has in place to protect US investors by restricting the listing of a Chinese military company or any entity tied to the military of a concerned country. 

The Nasdaq Golden Dragon China Index, a gauge tracking Chinese companies listed in the US, fell 6.3% in the three trading days through Tuesday.

The Republican lawmakers specifically mentioned Hesai Group, asking Friedman if the exchange would consider delisting the Chinese company that started trading on the Nasdaq in February 2023. Hesai, designated as a Chinese military company, plummeted 21% since April 11. 

The lawmakers are focused more broadly than on just a single company, according to Seiberg, who also said this is a bipartisan issue though the letter was only signed by Republicans. “Any objection would be spun as favoring the Chinese military having access to US capital to facilitate the construction of more potent and effective weapons,” he said. “No lawmaker from either party wants to take that stand.”

While Cowen doesn’t see a “broader delisting of Chinese companies from US exchanges as imminent,” they believe the real risk will come in late summer or fall when the House and Senate consider the National Defense Authorization Act. Odds may rise further in 2025 or the following year should Donald Trump win the presidential election in November, Seiberg said.

--With assistance from Felice Maranz.

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