NYSE takes over heat after flip-flop to Chinese companies

The order was one of the last rescues of Mr. Trump, who opposed Beijing and put the NYSE in a difficult situation, as the stock exchange has long received the initial public offerings of Chinese companies.

While on a trip to Egypt, Treasury Secretary Steven Mnuchin called on NYSE President Stacey Cunningham to oppose the reversal of the exchange operator, a Trump administration official said. Mr Mnuchin supports the NYSE’s initial plan to deregister the company, the official added.

News of his call to Mrs. Cunningham was previously reported by Bloomberg News. An NYSE spokesman, owned by Intercontinental Exchange Inc., declined to comment on Mr. Mnuchin’s call.

NYSE moves have also caused investors to be shocked by the final impact on the companies involved, all in the telecommunications business: China Mobile Ltd.

CHL 9.27%

, China Telecom Body.

NOT 8.83%

and China Unicom (Hong Kong) Ltd.

CHU 11.82%

The three stocks embarked on a wild journey, first collapsing and then returning after facing the NYSE.

The Big Board said on December 31 that it would withdraw the US deposit certificates from the three companies in order to comply with Mr. Trump’s order. Then, late Monday, the NYSE said in a notice that it would suspend the deregistration process, citing “additional consultations with relevant regulators.” Monday’s opinion related to a guidance document recently issued by the Treasury Department, which clarifies the companies that are affected by the executive order, but the NYSE did not offer any other explanation.

A person familiar with the matter said on Tuesday that the NYSE had overturned its decision because of ambiguities as to whether the three telecommunications companies were covered by Mr. Trump’s order. If and when there is formal confirmation that the three companies are covered by the order, the NYSE would withdraw them, the person said.

NYSE unaffiliated attorneys said there may be some confusion about the companies that are the subject of the order and when the trading ban went into effect.

“Clearly, there was some kind of new information or miscommunication that led them to change direction in a few days,” said Alan Seem, a partner at law firm Jones Day.

“The last thing the NYSE wants to do is take out these Chinese companies,” added Mr. Seem, who has worked at the IPOs of China Mobile, China Telecom and other Chinese companies in a previous job.

Trump’s November order identified 31 “Chinese communist military companies” and banned the trading of their shares as of Jan. 11, but did not specify in detail which of the company’s subsidiaries and subsidiaries could be covered by the trading ban. This ambiguity has led to a behind-the-scenes fight between the various agencies over how wide the ban should be, The Wall Street Journal reported in December.

The Treasury Department issued guidelines on December 28, saying the ban would apply to subsidiaries that owned 50% or more of blacklisted Chinese companies. This would surprise the three NYSE-listed telecommunications companies, which are mostly blacklisted.

However, the guidance document also stated that the ban on subsidiaries would enter into force only 60 days after the Treasury Department officially named the subsidiaries subject to the order. The department has not yet taken this step. Potentially, this could exempt the three NYSE-listed telecommunications companies, as the new administration of President-elect Joe Biden could reverse the ban before it takes effect.

The NYSE cited the guidelines on Dec. 28 when it overturned the write-off decision. It is unclear why the exchange continued with the announcement of New Year’s Eve withdrawal, even though the Treasury Department had not officially named the subsidiaries that will be covered by Mr. Trump’s order. Stock exchanges are strictly regulated and normally work closely with their supervisory agencies in Washington.

Some supporters of Trump’s tough stance on China have thrown NYSE headaches in his face.

“Once again, Wall Street has chosen the Chinese Communist Party over the interests of the economic and national security of the United States,” Christopher Iacovella, head of the American Security Association, a brokerage group, said in a statement.

“The American people deserve an explanation for this inconceivable reversal,” added Mr Iacovella, whose group called for stricter restrictions on Chinese stocks listed on US stock exchanges.

The intention of the NYSE is to follow Mr. Trump’s order, said the person familiar with the matter.

Some investors felt the clash of NYSE movements. An individual investor said it suffered a major loss of shares in China Mobile due to the NYSE’s initial decision to write off the company.

He held the shares in hopes that Mr. Biden would eventually reverse Trump’s order, but decided to sell after his brokerage informed him that investors could have trouble liquidating the shares, the investor said. This notice led him to sell the shares at a loss even before the NYSE reversed its decision.

Shares of China Mobile’s NYSE listed were down 5.9% months before the announcement of the reversal, then up 9.3% on Tuesday.

—Paul Kiernan contributed to this article.

Write to Alexander Osipovich at [email protected]