New York Stock Exchange (NYSE) announced on Thursday that it will delist three Chinese telecommunications giants – China Mobile, China Telecom, and China Unicom – in compliance with the executive order issued by the Trump administration. This delisting of these Chinese telcos will have far-reaching economic and political implications.
This article will provide an overview of these implications and analyze the potential impact of this delisting.
Overview of US executive order
On November 12th, 2020 the US Securities and Exchange Commission (SEC) issued an executive order that bars US investors from buying shares of three Chinese telecoms companies – China Mobile, China Telecom and China Unicom. This was in response to the continued risk posed by the telecommunications industry in China to United States national security.
Following this executive order, the New York Stock Exchange (NYSE) announced plans to delist all three Chinese telcos.
This executive order highlights the increasingly tense relationship between the United States and Chinese governments. As a result, it is expected to have serious financial repercussions for thousands of American investors who own stock in these companies. However, it’s important to know that while this order applies only to American investors, it could also have ripple effects on other stock markets around the world.
For now there is no immediate trend visible in other exchanges that suggest this executive order has had any direct effect on them yet; however, many analysts worry that it could lead to a broader reduction of reliance on Chinese stocks – which may topically be felt beyond just NYSE’s US-based investors. Ultimately, any repercussions from this executive order are still uncertain but must be monitored closely in forthcoming weeks and months.
Background
The New York Stock Exchange (NYSE) has announced that it will delist three Chinese telecom giants, China Mobile, China Telecom and China Unicom, as US President Donald Trump ordered. The President signed an executive order back in November which forbids US investors from buying shares of Chinese companies deemed to be linked to the Chinese military.
The delisting, scheduled to commence on January 11th, 2021, is a result of the executive order and has been met with great controversy in both the US and Chinese financial markets.
Overview of Chinese telcos
China’s three largest telecommunications companies—China Mobile, China Telecom and China Unicom—are among some of the largest firms in the world. These three companies collectively control over 90 percent of the country’s wireless market and own a large share of its broadband service market. These telcos are growing rapidly and have been key players in China’s expansion of 4G networks.
However, these telecom giants were recently impacted by a US executive order that has put their listing status on the NYSE under pressure. The order prohibits US investors from buying shares of companies deemed to be owned or controlled by Chinese military. The executive order specifically singles out these telcos with significant government or military ties, and have hence been placed in the restricted list by NYSE as announced earlier this week.
NYSE to delist Chinese telco giants on US executive order
The US executive order prohibits US citizens from investing in companies that the US government believes invest in Chinese military-industrial complexes. The delisting of the Chinese telecom giants was made public on December 31st, 2020 and has left many investors uncertain what effect this will have on their holdings.
The executive order applies to 33 companies, including China Mobile, China Telecom, and China Unicom, including some of China’s biggest technology and telecom giants. Other companies affected by the move include surveillance equipment maker Hikvision Digital Technology Co Ltd, facial recognition provider Megvii Technology Ltd and agricultural drone maker SZ DJI Technology Co Ltd.
This initiative has caused domestic and international concerns regarding market uncertainty and a potential for international trade tensions assuming an increasingly important role going into 2021. While the immediate impact is hard to assess at this point due to deliberations on how strictly it will be enforced, one thing remains certain – restrictions in capital flows between two economic superpowers can be expected to have far-reaching implications for global markets.
NYSE Announces Delisting of Chinese Telcos
The New York Stock Exchange (NYSE) recently announced that it would delist three major Chinese telecommunications companies. This decision was made in response to an executive order from the US government stating that companies owned or controlled by the Chinese government are subject to US sanctions.
This announcement has sent shockwaves through the markets and has raised questions about the consequences of the delistings.
Overview of NYSE decision
The New York Stock Exchange (NYSE) has announced plans to delist three major Chinese telecom companies on January 11, 2021 under the executive order issued by the Trump administration. The NYSE’s decision affects China Mobile, China Telecom Corp., and China Unicom Hong Kong Ltd.
According to the US executive order released in November 2020, US citizens are prohibited from providing services to stock exchanges that list these companies by January 11. In addition, the Executive Order prohibits transactions and activities with any company owned or controlled, directly or indirectly, by the Government of China that supports its military-industrial complex.
As a result of this new executive order, NYSE has suspended trading for each of the three companies involved: China Mobile Ltd., China Telecom Corp., and China Unicom Hong Kong Ltd. Residents and U.S.-based investors will no longer be able to buy or sell securities in these firms listed on NYSE after January 11th 2021. However, overseas investors still have access to these stocks as they are not affected by any restrictions imposed by the US president’s executive order discussed here.
Impact of delisting on Chinese telcos
The delisting of major Chinese telcos from the New York Stock Exchange is expected to substantially impact the affected companies. According to reports, shares of three major Chinese telcos – China Mobile, China Telecom, and China Unicom, currently listed on the NYSE – will all be delisted under an executive order issued by US president Donald Trump.
The move seeks to cut off US investors’ access to these firms and has reportedly caused a sell-off in their respective stock prices. Additionally, delisting is expected to restrict investments in these firms by both institutional and retail investors that prefer exchanges with greater liquidity. This could result in reduced foreign investment activity and is likely to harm their business operations domestically and internationally.
Furthermore, the delisting also comes amid an increasingly hostile political climate between the United States and China and disputes over human rights violations against ethnic minority Uighurs within China. This could negatively affect investor sentiment towards Chinese telcos internationally, limiting long-term market growth potential for these firms outside their domestic market.
Market Reaction
The announcement of the NYSE’s delisting of three Chinese telecom giants brought widespread uncertainty to the markets, with fears of an economic downturn in China and the US. As a result, investors are currently taking a wait-and-see approach, as market reaction could range from a modest decline to a massive selloff.
Investors also consider how much more Chinese stocks need to be delisted on other major exchanges such as NASDAQ. For example, trades for companies like Hikvision and SMIC have been halted on NASDAQ following the news that SEC had opened investigations into potential violations of US law.
Though there is some certainty about the direction of these three affected telecoms’ stocks, there’s still much uncertainty given the lack of details around enforcement and resolution by both parties. As such, many investors are waiting for confirmation or denial of the executive order before making any substantial moves in either direction – including purchases or divestment.
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