Delisted Chinese firms’ $US5.6b value hit | Ralph-Lauren

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Index providers MSCI, FTSE Russell and S&P Dow Jones Indices say they will cut three Chinese telecom companies from benchmarks, part of a widening fallout from a US investment ban that has battered their share prices.

The deletions of China Mobile, China Telecom and China Unicom Hong Kong add to a raft of Chinese firms already dropped from indexes because of the ban and will force index tracking funds to sell their stock.

The firms have large numbers of passive investors and the announcements wiped a combined $US5.6 billion ($A7.2 billion) off the value of their Hong Kong-traded shares on Friday.

The index deletions stem from a November order from US President Donald Trump, which bans Americans from investing in Chinese companies that the United States deems to have links with China’s military.

They also come on the heels of a decision by the New York Stock Exchange – after some flip-flopping – to delist the three firms’ US-traded American Depositary Receipts on January 11.

MSCI said it would remove the three companies from its China indexes on January 8 and FTSE Russell said they would be cut from its Global Equity Index series and China A Inclusion indexes on January 11.

S&P Dow Jones Indices will remove the Hong Kong-traded stocks of the three firms, as well as fixed income securities of China Telecom and China United Network Communications on January 12.

China’s foreign ministry said it firmly opposes what it called the United States’ abuse of its power to oppress Chinese companies.

“This will undermine the United States’ interests and national image,” ministry spokeswoman Hua Chunying said.

The deletions and NYSE delistings came after the US Treasury clarified the scope of the ban.

Fund managers say the market impact may be shortlived as non-US investors are likely to step in and purchase the stocks.

Chipmaker SMIC, for example, has jumped more than 35 per cent in two weeks despite being covered by the ban and removed from indexes.

China Mobile shares closed down 4 per cent at their lowest level since 2006 and China Telecom shares dropped 3 per cent to a 12-year low, while China Unicom finished down 0.9 per cent after paring steep losses.

All three stocks have shed more than 20 per cent since Trump’s November order.



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