NYSE reverses course again with plan to delist Chinese telecoms firms

Jodi Xu Klein
·3-min read

The New York Stock Exchange (NYSE) on Wednesday said it is moving forward to delist three Chinese telecommunications carriers again less than two days after it halted that plan.

The decision is based on “new specific guidance received on Jan. 5, 2021, that the Department of Treasury’s Office of Foreign Assets Control provided to the NYSE,” the exchange said in a statement Wednesday. “The issuers have a right to a review of this determination.”

This was the second reversal since December 31 when the exchange announced its plan to delist the three Chinese companies. Late Monday, the exchange walked back on that plan saying the companies would continue to be listed.

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American investors, if the delistings are completed, will be prohibited from buying new securities in these three companies starting January 11.

A China Telecom store in Shanghai, China on Wednesday. Photo: Bloomberg
A China Telecom store in Shanghai, China on Wednesday. Photo: Bloomberg

The American depositary shares (ADSs) of China Telecom fell by as much as 4.1 per cent to US$27.18, while China Mobile declined by 4.2 per cent to US$28.11 and China Unicom (Hong Kong) retreated by 3.9 per cent to US$5.91 Wednesday in New York.

Prices in the ADSs of the companies fluctuated in the past week as the delisting decisions flip-flopped, swinging up and down following each change.

“The process has been chaotic, opaque and short-sighted,” said Euan Rellie, managing partner at Asia-focused investment advisory firm BDA Partners. “It harms US and global investors, including pension funds. It also damages the reputation of the NYSE for transparency and independence.”

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“The status of the US as an international financial centre relies on the confidence that global companies and investors have in the certainty of our rules,” Rellie added. “We should not distort markets in this way.”

The parent companies - China Mobile, China Telecom, and China Unicom - were part of the 35 Chinese companies that were blacklisted by the Defence Department earlier in the year for their presumed association with Chinese military.

The New York Stock Exchange’s decision to delist these companies followed President Donald Trump’s November 12 executive order that barred US investors from making new purchases in these companies’ securities beginning January 11. Investors will have until November to sell their existing holdings, according to the order.

Part of the confusion that led to the back and forth in the decision was that the entities listed on the New York Stock Exchange were not the parent companies but their subsidiaries, and it was unclear if they were affected by the order.

A display from Chinese telecommunications firm China Mobile at an expo in Beijing in October 2020. Photo: AP
A display from Chinese telecommunications firm China Mobile at an expo in Beijing in October 2020. Photo: AP

The Treasury Department, which wanted to be more cautious about the move, watered down some of the sweeping aspects of the order, clarifying in its own announcement late December that subsidiaries would only be included when explicitly named by the agency.

On Wednesday, Treasury clarified the definition in a new announcement that the November executive order applied to any subsidiary with a name that “exactly or closely” matches the name of the parent company on the list.

“It is outrageous that those in the US Treasury Department attempted to undermine the President’s executive order in a blatant attempt to serve the interests of Wall Street and the Chinese Communist Party at the expense of the United States,” said Florida Senator Marco Rubio, a Republican and one of the most vocal China hawks, in a Wednesday statement.

“After an intense pressure campaign from those of us who believe we should prioritize the interests of American workers and mom and pop investors above Beijing and Wall Street, I am pleased that the NYSE decided to reverse their earlier announcement and take the correct action.”

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