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By Chong Koh Ping
The New York Stock Exchange will delist the Big Three Chinese telecommunications operators, following an order from the United States government prohibiting Americans from investing in companies that it says help the Chinese military.
This will result in the launch of the Big Board of China Mobile Ltd. – which is one of China’s most valuable state-owned enterprises – after more than two decades, following the privatization of its predecessor in 1997.
The NYSE move is the latest setback for U.S. investors in these companies, which rank among the world’s largest telecommunications providers but have lagged behind larger markets since the companies began listing here. more than two decades ago.
U.S. shares of China Mobile, the largest of the three by market value, have fallen 29% in the past year, according to FactSet, while China Telecom Corp. Over the same period, the S&P 500 Index returned 18% and the communications services sector of the MSCI World Index increased 22%. All figures reflect total returns including dividends.
Over the past decade, China Mobile shares have fallen 15%, including dividend payments, according to FactSet data, while China Telecom has fallen 32% and China Unicom has fallen 54%. The S&P 500 gained 267% on the same basis and the MSCI World communications sector gained 165%.
The broader impact of write-offs in the US market is likely to be limited, partly because the big telecom companies haven’t been a hot part of the market recently and partly because these companies will continue to trade in Hong Kong. , where they are more closely followed by analysts and investors.
The NYSE announced, at the latest, that it would suspend trading in securities issued by China Mobile, China Telecom and China Unicom at 4 a.m. on January 11. He will act four days earlier if he does not obtain confirmation from the Depository Trust & Clearing Corp. that the clearinghouse will settle transactions made on January 7 and 8.
The NYSE has said it will also stop trading in closed-end funds and exchange-traded products listed on its NYSE Arca exchange if they hold prohibited stocks.
China Unicom said on Friday that it will issue a statement in due course. China Mobile and China Telecom did not immediately respond to requests for comment.
An executive order signed by President Trump in November will prevent Americans from investing in a list of companies that the U.S. government says provide and support Chinese military, intelligence, and security services. The ban begins on January 11, and investors have until November to dispose of their holdings.
The list currently includes 35 companies – including China’s largest chipmaker – as well as surveillance, aerospace, shipbuilding, construction and technology companies.
Initially, it was unclear whether the order covered subsidiaries as well as parent companies, and U.S. government executives argued over the extent of the blacklist, the Wall Street Journal reported in December.
However, this week the Treasury Department said it would add subsidiaries to the blacklist if they are majority-owned – or controlled – by a company that has been named. The Treasury’s Office of Foreign Assets Control, which manages economic sanctions, also said the ban targeted derivatives and certificates of deposit, as well as exchange-traded funds, index funds and mutual funds. .
Last month, index compilers including MSCI Inc., FTSE Russell and S&P Dow Jones Indices, said they would remove certain Chinese stocks from their benchmarks due to the order, not excluding stocks issued by subsidiaries and affiliates.
China Mobile, which has a market value of around $ 117 billion, was not included on the original blacklist, unlike its parent company, China Mobile Communications Group. Its US stocks are lightly traded relative to its Hong Kong stocks, according to FactSet data. About 2.1 million U.S. certificates of deposit have been traded daily on average over the past three months, compared to 34 million Hong Kong shares per day. Each ADR is equivalent to five Hong Kong ordinary shares.
Other US initiatives could also result in more write-offs. Last month, Mr. Trump signed a law that could force Chinese companies to launch U.S. markets if U.S. regulators can’t inspect their audits within three years. Some Chinese companies, including Alibaba Group Holding Ltd. and JD.com Inc., have already secured secondary listings in Hong Kong, which could help mitigate the impact of such action.
Write to Chong Koh Ping at [email protected]
(END) Dow Jones News Wire
January 1, 2021 2:42 p.m. ET (7:42 p.m. GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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