From January 11, 2021, the US stock exchanges will ban companies that, according to the US government, collaborate with the Chinese military and intelligence agencies. In order to apply this new measure, which follows a decree signed by Donald Trump in November 2020, American shareholders have until November 2021 to divest their holdings.
The New York Stock Exchange (NYSE) will remove 35 Chinese companies from its list, including the major telecommunications operators: China Mobile, China Telecom and China Unicom Hong Kong. Surveillance, aerospace, shipbuilding, construction, technology companies and the main microprocessor manufacturing company are also affected.
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Last month, some stock indices, including the Dow Jones, removed the securities of the affected companies but left out the securities issued by subsidiaries or other affiliates. For example, the US Treasury Department recently announced it would add subsidiaries that are majority owned or controlled by one of the companies on the list. The branch that manages the Treasury Department’s economic sanctions also said the ban covered derivatives, certificates of deposit, index funds, and mutual funds.
So-called “political” restrictions with “limited” effect
On the Chinese side, according to Reuters, diplomats for the South China Morning Post “expressed the hope that the election of Joe Biden will help ease tensions between the two countries.” In addition, the Securities Regulatory Commission condemns this decision, which, according to its website, “completely ignores the real situation of companies and the rights and legitimate interests of global investors, and seriously undermines the normal rules and order of companies.” Market “.
At a meeting on Sunday January 3, high-level Commission officials called the restrictions “political”, indicating that their impact will be “limited”. Indeed, these companies have the Chinese stock exchanges as well as their national market, which has hundreds of millions of customers and investment is backed by Beijing, making 5G a national priority. According to the Wall Street Journal, Alibaba and JD.com have received secondary listings on the Hong Kong Stock Exchange.
Since the NYSE listing of China Mobile, the largest of the three telecommunications companies, US stocks have returned 648%, according to Dow Jones data. Still, 2020 was not a successful year with China Mobile’s value falling 29%, China Telecom’s 30% and China Unicom’s value to 39%.