NYSE to Delist China's Major Telecommunications Operators -- Update
01 Gennaio 2021 - 8:57PM
Dow Jones News
By Chong Koh Ping
The New York Stock Exchange will delist China's three large
telecommunication carriers, following a U.S. government order
barring Americans from investing in companies it says help the
Chinese military.
This will result in China Mobile Ltd. -- which is among the most
valuable of China's listed state-owned enterprises -- being kicked
off the Big Board after more than two decades, after the
privatization of its predecessor in 1997.
The NYSE decision is the latest setback for U.S. investors in
these companies, which rank among the largest global
telecommunications providers but have lagged behind the broader
markets since the companies began listing here more than two
decades ago.
U.S. shares in China Mobile, the largest of the three by market
value, declined 29% over the past year, according to FactSet, while
China Telecom Corp. dropped 30% and China Unicom Hong Kong Ltd.
fell 39%. Over the same span, the S&P 500 index returned 18%
and the communications-services sector of the MSCI World Index rose
22%. All figures reflect total returns, including dividends.
Over the past decade, China Mobile shares have declined 15%
including dividend payments, FactSet data show, while China Telecom
has dropped 32% and China Unicom has fallen 54%. The S&P 500
has gained 267% on the same basis and the MSCI World communications
sector has gained 165%.
The broader U.S. market impact of the delistings is likely to be
limited, in part because large telecom companies haven't been a hot
part of the market recently and in part because these companies
will continue to be traded in Hong Kong, where they are more
closely followed by analysts and investors.
NYSE said, at the latest, that it would suspend trading in
securities issued by China Mobile, China Telecom and China Unicom
at 4 a.m. on Jan. 11. It will act four days sooner if it doesn't
get confirmation from the Depository Trust & Clearing Corp.
that the clearinghouse will settle trades made on Jan. 7 and Jan.
8.
NYSE said it would also halt trading in closed-end funds and in
exchange-traded products listed on its NYSE Arca exchange if they
hold banned stocks.
On Friday, China Unicom said it will release a statement in due
course. China Mobile and China Telecom didn't immediately respond
to requests for comment.
An executive order signed by President Trump in November will
block Americans from investing in a list of companies the U.S.
government says supply and support China's military, intelligence
and security services. The ban starts on Jan. 11 and investors have
until November to divest themselves of their holdings.
The list currently includes 35 companies -- including China's
largest chip maker -- as well as surveillance, aerospace,
shipbuilding, construction and technology companies.
It wasn't initially clear whether the order covered subsidiaries
as well as parent companies, and U.S. government leaders clashed
over how broad the blacklist should be, The Wall Street Journal
reported in December.
However, this week, the Treasury Department said it would add
subsidiaries to the blacklist if they were majority-owned -- or
controlled -- by a company that has been named. The Treasury's
Office of Foreign Assets Control, which handles economic sanctions,
also said the ban covered derivatives and depositary receipts, 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 some Chinese
stocks from their benchmarks because of the order, though they
didn't exclude shares issued by subsidiaries and affiliates.
China Mobile, which has a market value of about $117 billion,
wasn't included on the original blacklist though its parent, China
Mobile Communications Group, was. Its U.S. stock is thinly traded
compared with its Hong Kong securities, FactSet data shows. About
2.1 million American depositary receipts traded daily on average
over the past three months, compared with 34 million Hong Kong
shares a day. Each ADR is equivalent to five ordinary shares in
Hong Kong.
Other U.S. initiatives could also bring more delistings. Last
month, Mr. Trump signed legislation that could have Chinese
companies kicked off U.S. markets if American regulators can't
inspect their audits within three years. Some Chinese companies,
including Alibaba Group Holding Ltd. and JD.com Inc., have already
obtained secondary listings in Hong Kong, which could help blunt
the impact of such an action.
Write to Chong Koh Ping at chong.kohping@wsj.com
(END) Dow Jones Newswires
January 01, 2021 14:42 ET (19:42 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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