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© Reuters. FILE PHOTO: Posters from China Telecom, China Mobile and China Unicom are seen during the China International Import Expo at the Shanghai National Convention and Exhibition Center.
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By Pei Li, Tom Westbrook and Alexandra Alper
HONG KONG / SINGAPORE / WASHINGTON (Reuters) – The New York Stock Exchange said it no longer intends to exclude three Chinese telecom giants, a surprising reversal of an announcement made last week and increasing confusion. insight into the US crackdown on companies allegedly linked to China’s military.
The U-turn comes in the final days of the Trump administration and in a context of tension within Washington over China’s policy. US Treasury Secretary Steve Mnuchin has long been seen as having a moderate view of China, seeking to thwart attempts by administration hardliners, many within the State Department, to crack down on Chinese companies. .
The exchange, which had planned to withdraw the companies – China Mobile (NYSE :), China Telecom (NYSE 🙂 and China Unicom (NYSE 🙂 – before January 11, said in a brief statement that it had made the decision “to in light of further consultations with the relevant regulatory authorities regarding the Office of Foreign Assets Control (US Treasury). “
“For years, the Treasury has led rearguard action to ease some of the toughest policies related to Chinese companies,” said Leland Miller, chief executive of US consultancy China Beige Book. “This is clearly still happening.”
However, China’s intransigent Republican senator Marco Rubio said in a tweet that the suggestion that the US Treasury may have caused the NYSE to overturn the ruling was “outrageous.”
“If it is true that someone in [Treasury] advised reversing the decision to exclude these Chinese companies, it was an outrageous effort to undermine [President Trump’s] Executive order, “he tweeted.
A representative for the NYSE, which is owned by global exchange operator Intercontinental Exchange (NYSE 🙂 Inc, declined to comment beyond the exchange’s statement on what caused it to change its mind. The Treasury declined to comment on the decision to keep the listings. OFAC, which is responsible for enforcing the sanctions, declined to comment.
FLIP FLOPS
In the final weeks of Donald Trump’s presidency, the sea change has underscored the lack of clarity about the implementation and implications of the US ban on investing in 35 Chinese companies believed to have military ties, said Tariq Dennison, managing director of GFM Asset. Management in Hong Kong.
Dennison’s funds hold China Mobile shares in both Hong Kong and New York. It has almost completely solved the New York positions by anticipating the need to find investments from US clients with less exposure to the risks associated with investment bans.
Some analysts said they believe OFAC had told the exchange that the takedowns were unnecessary even though investment in related companies was prohibited.
“We think this is the logical conclusion,” said Edison Lee, an analyst at Jefferies (NYSE :), who called the change in attitude “strange.”
Others added that the reversal made sense for the stock.
“China accounts for at least a quarter of foreign revenue (from the US stock exchanges). It’s a smart thing to do,” said Francis Lun, CEO of Geo Securities.
The Trump administration’s November order has prompted index makers, including Russell and MSCI Inc, to remove a dozen Chinese companies from their benchmarks list, but none removed all three telcos, all of them. which have significant US passive funds among their main shareholders.
China Mobile Ltd shares listed in Hong Kong, China Telecom Corp Ltd and China Unicom Hong Kong Ltd rose on the news.
The three telcos said in statements that they had taken note of the latest NYSE announcement and would release information in accordance with regulations, adding that investors should pay attention to investment risks.
China’s Foreign Ministry has criticized what it calls the US stretching of the concept of national security to crack down on Chinese companies.
He reiterated Tuesday that the United States’ status as an international financial center is based on the confidence that global companies and investors have in the certainty of its rules.
The November executive order prohibits US investors from buying shares in companies that Washington says are owned or controlled by the Chinese military as of November 2021.
While the directive falls short of enforcing delisting, a bill signed into law by President Trump last month will kick Chinese companies off U.S. stock exchanges if they fail to fully comply with the country’s auditing rules in three years.
“Over the past year, you’ve seen tighter policies on investment flows in Chinese companies,” Miller said. “But this is an issue the Biden administration wants very little to do with, and when combined with the Trump administration’s total lack of attention in its final days, a lot of these rules are likely to fall by the wayside.”
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