China’s three major telecoms are slipping into the withdrawal of NYSE ADRs

Photographer: Michael Nagle / Bloomberg

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China ‘s state – owned telecommunications companies declined in Hong Kong after the The New York Stock Exchange said it was withdrawing them to comply with a U.S. executive order sanctioning companies identified as affiliated with the Chinese military.

Actions of China Mobile Ltd., the largest of the three, fell 4.5% on Monday to its lowest level since 2006, while China Mobile Ltd. fell. China Telecom Corp. fell 5.6%. The two recorded their biggest intraday losses since mid-November. China Unicom Hong Kong Ltd. fell 3.6%. U.S. deposit receipts from the three companies will be suspended from trading between Jan. 7 and Jan. 11, and the process of withdrawing them has begun, the NYSE said.

The nation’s major oil companies included CNOOC Ltd. too fell into the concern that they would then be earmarked for the US withdrawal

“It’s largely a sentiment blow” that could be temporary, said Mark Huang, an analyst at Bright Smart Securities in Hong Kong. “Although the ADRs are not exceptionally large, there is a certain impact on fundraising. Some passive index monitoring funds may be sold to avoid risks. More importantly, this is another reason to leave telecommunications and they pursue higher sectors ”.

The NYSE measure followed an order by U.S. President Donald Trump in November banning U.S. investment in Chinese-owned or military-controlled companies in an attempt to pressure Beijing into what it considers abusive business practices. . China Securities Regulator He said, given the small number of shares traded in the United States to each of the three phone companies, the impact on them would be limited and they are well positioned to deal with any consequences.

Symbolic blow

The withdrawal is more than a symbolic blow amid increased geopolitical friction between the world’s two largest economies, as they are low on the NYSE. Companies also get almost all of their revenue from China.

The decision “may impose short-term selling pressure on the shares,” Citigroup Inc. said. in a research report. “However, the operations of Chinese telecom companies are mainly focused on the domestic and their solid fundamentals along with recovery trends and positive cash flows will not be affected by the downturn, in our view.”

ADRs total less than 20 billion yuan ($ 3.1 billion) and account for a maximum of 2.2% of total shares, The China Securities Regulatory Commission said in a statement Sunday. China Telecom has 800 million yuan of ADR and China Unicom has about 1.2 trillion yuan.

“The recent move by some political forces in the U.S. to continually and unfoundedly suppress foreign companies listed on U.S. markets, even at the cost of undermining their own position in global capital markets, has shown that the rules and U.S. institutions can become arbitrary, reckless, and unpredictable, ”the CSRC said. “It’s definitely not a successful action.”

FTSE Russell

FTSE index provider Russell will they say Monday whether it plans to remove more Chinese stocks from its benchmarks, after the U.S. added to its list of stocks sanctioned in recent weeks. FTSE Russell had already listed eight company deletions in early December, a decision that was later followed by colleagues MSCI Inc. i S&P Dow Jones. FTSE Russell’s changes will be effective from the start of trading on Thursday.

On Monday, in separate statements, each telecom operator said it “regrets” the shares of the NYSE and said the decision could affect the prices and trading volume of the companies ’shares. All three companies said they had not received any notification from the NYSE about the low.

China Unicom and China Mobile said they were reviewing ways to protect companies’ “legal rights.” China Telecom said it is considering “appropriate options” to “safeguard the legitimate interests of the company.”