The three major Chinese telecommunications companies are moving to the NYSE to eliminate ADRs

Photographer: Michael Nagle / Bloomberg

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Chinese state-owned telecommunications companies fell in Hong Kong after The New York Stock Exchange said it was eliminating them in order to comply with a US executive order sanctioning companies identified as affiliated with the Chinese military.

Actions of China Mobile Ltd., the largest of the three, fell to 4.5% months to its lowest level in 2006, while China Telecom Corp. decreased by 5.6%. The two recorded the biggest losses during the day since mid-November. China Unicom Hong Kong Ltd. fell 3.6%. The US deposit receipts of the three companies will be suspended from trading between January 7 and January 11, and their deregistration process has begun, the NYSE said.

National oil majorities, inclusive CNOOC Ltd. as well concerns have been raised that they will continue to be prosecuted for delisting in the United States

“It’s largely a blow to sentiment,” which could be temporary, said Mark Huang, an analyst at Bright Smart Securities in Hong Kong. “Although the RDAs are not exceptionally high, there is a certain impact on fundraising. Some passive index tracking funds can be sold to avoid risk. More importantly, this is another reason to give up telecomunications and to track sectors that outperform. “

The NYSE movement followed an order by US President Donald Trump in November banning US investment in Chinese companies owned or controlled by the military, in an attempt to put pressure on Beijing on what it considered abusive trade practices. China Securities Regulatory Authority he said, given the small amount of shares traded in the US at each of the three phone companies, their impact would be limited and well positioned to deal with any consequences.

Symbolic blow

The write-off is more of a symbolic blow against the backdrop of heightened geopolitical friction between the world’s two largest economies, as they are traded thinly on the NYSE. Companies also get almost all their revenue from China.

The decision “may impose short-term selling pressure on stocks,” Citigroup Inc. said. in a research report. “However, China’s telecommunications operations are mainly concentrated domestically and their solid fundamentals, along with positive recovery trends and cash flows, will not be affected by the write-offs, in our view.”

ADRs total less than 20 billion yuan ($ 3.1 billion) and represent a maximum of 2.2% of total shares each, China Securities Regulatory Commission said in a statement Sunday. China Telecom has 800 million yuan ADR, and China Unicom has about 1.2 billion yuan.

“The recent move by US political forces to continuously and unfoundedly suppress foreign companies listed on US markets, even at the cost of undermining their position in global capital markets, has shown that US rules and institutions can become arbitrary, reckless and unpredictable “, said CSRC. “It’s definitely not a wise move.”

FTSE Russell

FTSE index provider Russell will say on Monday whether it intends to remove more Chinese stocks from benchmarks, after the US added to its list of stocks sanctioned in recent weeks. FTSE Russell has already listed eight deletions of the company in early December, a decision that was later followed by colleagues MSCI Inc. and S&P Dow Jones. The changes to FTSE Russell will take effect from the start of trading on Thursday.

In separate statements on Monday, each telecom operator said it “regrets” the NYSE’s shares and said the decision could affect the prices and trading volume of the companies’ shares. All three companies said they had not received any notification from the NYSE regarding the delisting.

China Unicom and China Mobile have said they are looking at ways to protect companies’ “legal rights”. China Telecom said it was considering “appropriate options” to “protect the company’s legitimate interests.”