NYSE takes heat after flip-flop in Chinese companies

The order was one of Mr. Trump’s last saves by taking over Beijing and putting the NYSE in a difficult position, as the exchange has long received initial public offerings from Chinese companies.

While on a trip to Egypt, Treasury Secretary Steven Mnuchin called on NYSE President Stacey Cunningham to oppose the reversal of the change operator, a Trump administration official said. . Mnuchin supports the NYSE’s original plan to withdraw the companies, the official added.

Bloomberg News previously reported the news of her call to Ms. Cunningham. A NYSE spokesman, owned by Intercontinental Exchange Inc., declined to comment on Mr. Mnuchin’s call.

The movements of the NYSE have also caused consternation among investors about the final impact on the companies in question, all of them in telecommunications: China Mobile Ltd.

CHL 9.27%

, China Telecom Corp.

NO 8.83%

and China Unicom (Hong Kong) Ltd.

CHU 11.82%

All three stocks have followed a wild ride, first falling and then bouncing behind the rough face of the NYSE.

The Grand Board said on Dec. 31 that U.S. deposit receipts would be withdrawn from the three companies to comply with Trump’s order. Then, in late Monday, the NYSE said in a notice that it would suspend the withdrawal process, citing “a new consultation with the relevant regulatory authorities.” Monday’s notice was related to a guidance document recently released by the Treasury Department that explained the companies affected by the executive order, but the NYSE did not provide any other explanation.

A person familiar with the matter said Tuesday that the NYSE reversed its decision because of ambiguities about whether the three telecommunications companies are covered by Trump’s order. If and when there is formal confirmation that all three companies are covered by the order, the NYSE would withdraw them, that person said.

Lawyers not affiliated with the NYSE said there may be some confusion about which companies are covered by the order and when the trade ban goes into effect.

“Obviously there was some kind of new information or bad communication that made them change direction in a couple of days,” said Alan Seem, a partner at the Jones Day law firm.

“The last thing the NYSE wants to do is have to withdraw these Chinese companies,” added Seem, who worked at the IPOs of China Mobile, China Telecom and other Chinese companies in a previous job.

Trump’s November order identified 31 “Chinese communist military companies” and banned trading in its shares as of Jan. 11. But it was not detailed in detail which of the subsidiaries and subsidiaries of the companies could also be covered by the trade ban. This ambiguity sparked a backstage fight between the various agencies over the extent of the ban, The Wall Street Journal reported in December.

The Treasury Department issued the guidelines on Dec. 28 stating that the ban would apply to subsidiaries that were owned by 50% or more of Chinese blacklisted companies. This would capture the three NYSE-listed telecommunications companies, which are majority-owned by blacklisted companies.

But the guidance document also said the ban on subsidiaries would only come into force 60 days after the Treasury Department has formally designated which subsidiaries are covered by the order. The department has not yet taken that step. Potentially, this could save the three NYSE-listed telecommunications companies, as the administration of President-elect Joe Biden could reverse the ban before it takes effect.

The NYSE cited the Dec. 28 guidelines when it reversed the withdrawal decision. It’s unclear why the exchange continued with its New Year’s Eve withdrawal announcement, even though the Treasury Department had not formally designated the subsidiaries that would be covered by Trump’s order. Stock exchanges are tightly regulated and typically work closely with their control agencies in Washington.

Some supporters of Mr. Trump’s tough stance toward China blasted the NYSE for its rough face.

“Once again Wall Street has chosen the Chinese Communist Party over the interests of U.S. economic and national security,” Christopher Iacovella, head of the American Securities Association, a brokerage group, said in a statement.

“The American people deserve an explanation for this unthinkable investment,” added Iacovella, whose group has supported stricter restrictions on Chinese stocks listed on U.S. stock exchanges.

The NYSE’s intent is to comply with Trump’s order, the person familiar with the matter said.

Some investors felt a whiplash by the NYSE moves. An individual investor said it had suffered a significant loss in China Mobile shares due to the NYSE’s original decision to withdraw the company.

He had the shares in hopes that Mr. Biden would finally reverse Trump’s order, but decided to sell after his broker notified him that investors could have trouble liquidating the shares, the investor said. This notification motivated him to sell the shares at a loss just before the NYSE reversed its decision.

Shares of China Mobile’s NYSE listed fell 5.9% on Monday before the reversal was announced, and then shot up 9.3% on Tuesday.

—Paul Kiernan contributed to this article.

Write to Alexander Osipovich to [email protected]