In a shock reversal, the New York Stock Exchange has scrapped plans to delist 3 Chinese telecom giants
- The New York Stock Exchange (NYSE) announced on Monday it would no longer delist Chinese telecom giants China Mobile, China Telecom Corp, and China Unicom Hong Kong.
- The announcement was a shock reversal of a decision it had made just a week before.
- "In light of further consultation with relevant regulatory authorities … NYSE Regulation has announced that it no longer intends to move forward with the delisting action," the exchange said.
- The flip-flop has underscored the lack of clarity about a US ban on investment in 35 Chinese companies deemed to have military links.
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The New York Stock Exchange (NYSE) said on Monday it no longer intends to delist three Chinese telecom giants – a shock reversal of an announcement made only last week that is deepening confusion over a US crackdown on firms said to be linked to China's military.
The exchange, which had planned to delist the companies before January 11, said in a brief statement it had made the decision "in light of further consultation with relevant regulatory authorities."
Hong Kong-traded shares in the three state-backed firms, China Mobile, China Telecom Corp, and China Unicom Hong Kong, surged following the news.
"In light of further consultation with relevant regulatory authorities … NYSE Regulation has announced that it no longer intends to move forward with the delisting action," the exchange said in its statement.
Coming in the final weeks of Donald Trump's presidency, the flip-flop has underscored the lack of clarity about the implementation and implications of the US ban on investment in 35 Chinese companies deemed to have military links.
"(It) shows how little light there is in that set of regulatory guidance so far, especially around the time the US is changing administrations," Tariq Dennison, managing director at GFM Asset Management in Hong Kong, said.
Dennison's funds hold China Mobile shares in both Hong Kong and New York. He has almost entirely unwound New York positions in anticipation of needing to find US clients investments with less exposure to risks associated with the investment bans.
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Some analysts said they believe the exchange had been told by the Office of Foreign Assets Control — which is responsible for enforcing sanctions — that delistings were unnecessary even though investment in related companies was banned.
"We think this is the logical conclusion," said Jefferies analyst Edison Lee, who called the about-face "bizarre."
Others added that the reversal made sense.
"China accounts for at least one-fourth of US (stock exchanges') foreign income. It's a smart thing to do," Francis Lun, CEO of Geo Securities, said.
The November order from Trump's administration has prompted index makers including FTSE Russell and MSCI to cut a dozen Chinese companies on the list from their benchmarks, but none removed the three telecom firms, all of which have major passive US funds amongst their top shareholders.
The three telecom firms said in statements that they had taken note of the NYSE's latest announcement and would release information in accordance with regulations, adding that investors should pay attention to investment risks.
In its statement, the NYSE said it would "continue to evaluate the applicability of Executive Order 13959 to these Issuers and their continued listing status."
China's foreign ministry has lambasted what it calls the US stretching of the concept of national security to suppress Chinese companies.
Wang Yi, China's foreign minister, said on Saturday Trump's economic policies amount to an "attempt to suppress China and start a new Cold War."
The ministry reiterated on Tuesday that the status of the US as an international financial center relies on the confidence that global companies and investors have in the certainty of its rules.
A representative for the NYSE, which is owned by global exchange operator Intercontinental Exchange, declined to comment beyond the exchange's statement.
The NYSE move briefly lifted the yuan to a new 30-month high on hopes it might herald some kind of easing in geopolitical tension, but some were not optimistic that President-elect Joe Biden will bring about a quick de-escalation.
"He is inheriting a position of tension in US-China relations where he will probably not want his first 100 days to be remembered for instant concessions," said GFM Asset's Dennison.
Hong Kong-listed shares in China Mobile closed 5% higher on Tuesday, China Telecom shares finished up 3%, and China Unicom climbed more than 8% to a six-week high. The broader Hang Seng index rose 0.6%.
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