The New York Stock Exchange is beginning the process of withdrawing securities from three Chinese telecommunications companies, after President Trump last month banned U.S. investments in Chinese companies that Washington said are owned or controlled by the military.
The NYSE’s move, which will limit access for U.S. investors, follows global index providers MSCI, S&P Dow Jones Indices and FTSE Russell and Nasdaq that are removing several Chinese companies from their indices.
This is a “modest step, but at least an awakening to national security and human rights risk,” said Roger Robinson, a former White House official who supports China’s access to American investors.
NYSE said the issuers, China Telecom Corporation Limited, China Mobile Limited and China Unicom (Hong Kong) Limited, were no longer eligible for listing, as the order prohibits any securities transaction “designed to provide exposure to the investment in these values, of any communist Chinese military company, of anyone in the United States ”.
Trump’s November executive order affects some of China’s largest companies.
The order was intended to give teeth to a 1999 law that required the Department of Defense to draw up a list of Chinese military companies. The Pentagon, which only served the mandate this year, has so far designated 35 companies, including CNOOC oil company and China’s leading chip maker, Semiconductor Manufacturing International.
China has condemned the ban and fund managers have said it could benefit non-US investors capable of recovering the shares.
The NYSE said it would suspend stock trading on Jan. 7 or Jan. 11. Issuers have the right to review the decision. Each of the NYSE-designated telecommunications companies also has a list in Hong Kong.
China Telecom is also under fire from the Federal Communications Commission, which in December said it had begun the process of revoking the company’s authorization to operate in the United States.
Companies could not be contacted for comments on a public holiday in China.
Ties between Washington and Beijing have grown increasingly antagonistically over the past year, as the world’s two major economies clashed over Beijing’s management of the coronavirus outbreak, the imposition of a national security law on Hong Kong. Kong and rising tensions in the South China Sea.
Separately, President Trump signed a law last month that would expel Chinese companies from U.S. stock exchanges unless they comply with U.S. audit standards. Market participants said this would intensify the rush of Chinese companies listed in the U.S. to look for backups of the lists in Hong Kong.