US index publisher MSCI and others – FTSE Russell and S&P Dow Jones Indices – announced the removal of Chinese telecom firms from their benchmarks over the US’ investment ban, triggering massive sell-off of the affected stocks.
MSCI was the latest to announce that Hong-Kong-traded securities of three Chinese companies – China Mobile, China Telecom, and China Unicom Hong Kong – will be dropped from its indices, with the decision effective as of the close of business on Friday. Similar statements were earlier made by its British peer FTSE Russell and S&P Dow Jones Indices, with the two compilers due to drop the telecom trio not later than Monday.
All three providers cited US President Donald Trump’s order that prohibits Americans from owning or trading the securities of Chinese companies that the US claims have links to China’s military. The ban, which was introduced in November, targets over 30 firms, and has already resulted in the removal of other Chinese corporations from the global indices. Chinese corporate titans Alibaba and Tencent could also be added to the investment ban, further flaring tensions between the world’s largest economies.
The index publishers had to drop the Chinese telecom majors following the delisting decision of the New York Stock Exchange (NYSE), which changed its mind over the firms three times in just one week, but finally returned to the initial plan to delist their shares, creating confusion among investors and triggering wild swings in stock prices.
Though investors still have several months until November 11 to divest, the stocks of all three firms had steep losses on Friday. China Mobile shares hit a more than 14-year low and lost over four percent in Hong Kong. Similar losses were seen in China Telecom shares, while China Unicom fell by 11 percent. The sell-off wiped out over $5 billion in the affected firms’ value in Hong Kong, according to Reuters.
As some investors, including Americans, rushed to shed their holdings of the blacklisted stocks, others used the opportunity to find bargains. Mainland holdings of shares in some of the affected companies nearly tripled, Reuters said citing stock exchange operator Hong Kong Exchanges and Clearing Ltd.
Some investors who see the current situation as a buying opportunity say that the course of events may change as soon as Trump officially leaves office, while others say that even if the ban stays in place, it has nothing to do with the fundamentals of the affected firms. Moreover, China may benefit from the US delisting, as the firms kicked off of US exchanges have or will have secondary listings in Hong Kong, making the market even more attractive.
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