S&P Dow Jones to no longer remove ADRs of Chinese telecom companies

Wednesday, 06 Jan, 2021

Shares in China's big three state-owned telecom companies slid in Hong Kong Monday during the first day of trading since the New York Stock Exchange announced it was delisting the firms.

"This kind of abuse of national security and state power to suppress Chinese firms does not comply with market rules and violates market logic", the Chinese Ministry of Commerce said in a statement. The American depositary receipts of the three firms will be suspended from trading between Jan 7 and Jan 11, and the process of delisting them has started, NYSE said.

Bloomberg earlier reported that the NYSE may flip back.

The New York Stock Exchange reverses course, Nintendo acquires a game studio and an Indian electronics and lifestyle startup raises $100 million. The order sought to give teeth to a 1999 law that mandated that the Department of Defense compile a list of Chinese military companies.

Hard-liners in the administration - among them Secretary of State Michael R. Pompeo and White House trade advisor Peter Navarro - have warned investors for months that Chinese companies could be delisted from USA exchanges.

On Dec. 31 local time, the NYSE announced that in line with an executive order from the outgoing president, it would begin to delist the three major Chinese telecom firms. OFAC, which is responsible for enforcing sanctions, declined comment. Part one can be found here and part two can be found here.

China has been seeking to avoid escalating the dispute with Washington before Mr Biden takes office in a few weeks. His transition team has not commented on plans for the directive. It followed Trump's administration's plans aimed at blocking investment in 35 Chinese companies accused of being controlled or wholly owned by the Chinese military.

"In recent years it's been quite normal to see Chinese firms delist in the U.S. or have secondary listings in Hong Kong", Citic analysts wrote on Monday.

The Order has also forced index providers including MSCI, FTSE Russell, Nasdaq and S&P Global Dow Jones Indices to remove several Chinese companies from their indexes.

The three firms are mostly traded in Hong Kong, although they each have American depositary receipts listed in NY.

The three telecom firms said in statements that they had taken note of the NYSE's latest announcement and would release information in accordance with regulations, adding that investors should pay attention to investment risks.

"We firmly support the three companies to safeguard their legitimate rights according to law, and believe they are able to properly handle any negative impact caused by the executive order and potential delisting", it said. "In that way, the PRC exploits United States investors to finance the development and modernization of its military".