China Telecom, China Mobile and China Unicom signs are seen during the China International Import Expo (CIIE) at the National Exhibition and Convention Center in Shanghai, China on November 5, 2018.
Aly Song | Reuters
BEIJING – Outgoing President Donald Trump’s ban on US investments in some Chinese companies hit some of the biggest stocks in Hong Kong.
To accommodate the new clarifications to the order, equity index giants MSCI and FTSE Russell will remove Hong Kong-listed stocks from three Chinese telecommunications giants: China Mobile, China Telecom and China Unicom.
The removals will take effect due to the market opening on Monday, meaning the stocks are no longer part of indices that are tracked by trillions of global investment dollars.
The shares of the three Hong Kong-listed companies sold strongly on Friday, posting a 13% loss for China Telecom in five days, China Unicom more than 7.5% and China Mobile more than 8%.
With President-elect Joe Biden’s scheduled inauguration in less than two weeks, financial institutions are still trying to control the effects of Trump’s Executive Order, which bans Americans from owning stakes in Chinese companies that the White House claims that they are linked to China’s military.
The New York Stock Exchange will also remove the US-traded shares of the three Chinese telecommunications companies before US markets open on Monday.
The delisting comes after a week of confusion that saw the exchange go back and forth when it was first announced. The latest decision to proceed with the delisting was made after the Treasury Department clarified the scope of the executive order.
The deletions of MSCI and FTSE Russell are more significant to Chinese telecommunications companies as the three stocks are among the top 100 Hong Kong-listed stocks by market capitalization, according to Wind Information. Hong Kong stocks are also trading far more actively than those listed in the US
Growing investor interest in China
Global investors are increasingly interested in China, which economists expect to be the largest economy in the world in the next few years. For its part, the Chinese government is keen to attract more foreign capital and has tried in the past to improve the efficiency of state-owned companies by tapping private capital.
China Mobile’s double listing in Hong Kong and New York in 1997 marked the first massive privatization of a central government-sponsored company According to Goldman Sachs, the company was at $ 4.04 billion at the time, or $ 6.32 billion in 2019, which played a leading role in the offering.
The IPO also marked the first time a major Chinese state-owned company listed some of its shares on the New York Stock Exchange, Goldman added.
About two decades later, following a landmark decision in 2018, MSCI gradually added many mainland-traded A-shares to its emerging markets index, which is tracked by major global mutual funds.
However, the trend towards greater integration between the two countries has now reversed. Tensions between the US and China escalated more than two years ago under the Trump administration. The dispute originally focused on trade, but has now expanded to technology and finance.
Trump’s Executive Order allows US investors to sell or sell affected holdings by November 11, 2021. The majority of the companies mentioned are not listed in the United States if they are publicly traded
It is unclear what policy President-elect Joe Biden will pursue regarding US-China financial relations. Analysts expect his administration to focus on rallying traditional US allies to put pressure on Beijing over longstanding complaints about China’s unfair business practices.