Shares in China’s three large telecom carriers fell Monday, after the New York Stock Exchange said it would delist them to comply with a U.S. government ban.
In Monday-morning trading in Hong Kong, shares in the largest,
China Mobile Ltd.
, fell as much 4.5%, putting the stock on course for its lowest close since June 2006. Shares in smaller competitor
China Telecom Corp.
lost as much as 5.6%, while
The NYSE said Friday that it would suspend trading in securities issued by the three companies by Jan. 11, while halting trading in closed-end funds and exchange-traded products that hold banned stocks.
An executive order signed by President Trump in November will block on Jan. 11 Americans from investing in companies the U.S. government says help the Chinese military. It is a fresh setback for U.S. investors in Chinese telecom companies. These groups rank among the largest global telecommunications providers but have largely lagged behind the broader markets since the companies began listing in the U.S. more than two decades ago.
The three Chinese companies said holders of their American depositary receipts can swap those securities for their Hong Kong-listed ordinary shares through
Bank of New York Mellon,
which is the depositary for all three ADR programs.
The trio said they regretted the U.S. move but stressed the limited importance of their depositary receipts. These securities represent ownership of 3.3% to 8% of the companies’ tradable shares, and account for 9% to 22% of total trading volumes, when both ADRs and Hong Kong shares are considered, they said in separate statements.
Likewise, the China Securities Regulatory Commission said Sunday that the combined market value of the ADRs was less than the equivalent of about $3.1 billion and that the companies would be able to cope with the adverse effects of the ban and the delisting.
Still, the financial-market regulator attacked the ban, saying it was introduced for “political purposes, completely ignoring the actual situation of the companies concerned and the legitimate rights and interests of global investors, and seriously disrupting the normal market rules and order.”
In a note Sunday, Citigroup analyst Michelle Fang said the Hong Kong shares would come under pressure as shareholders liquidated ADRs to convert into Hong Kong stock. She said the potential removal of the shares from stock indexes could also cause further selling.
While the U.S. government has blacklisted the telecom carriers’ unlisted parent companies, it hasn’t added the publicly traded businesses to its list. Index providers have moved to exclude some companies directly named by U.S. authorities but haven’t said they would drop stocks in listed subsidiaries of blacklisted firms.
Write to Chong Koh Ping at firstname.lastname@example.org