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NYSE to Delist China’s Major Telecommunications Operators

NYSE to Delist China’s Major Telecommunications Operators

A trader at the New York Stock Exchange on Dec. 17. Photo: Colin Ziemer/Associated Press By Chong Koh Ping Close Chong Koh Ping

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A trader at the New York Stock Exchange on Dec. 17.

Photo: Colin Ziemer/Associated Press

The New York Stock Exchange will delist China’s three large telecommunication carriers, following a U.S. government order barring Americans from investing in firms it says help the Chinese military.

This will result in China Mobile Ltd. CHL 0.88% —which is among the most valuable of China’s listed state-owned enterprises—being kicked off the Big Board after more than two decades, following the privatization of its predecessor in 1997.

NYSE said, at the latest, that it would suspend trading in securities issued by China Mobile, China Telecom Corp. CHA -0.04% , and China Unicom Hong Kong Ltd. CHU -1.56% at 4 a.m. on Jan. 11. It will act four days sooner if it doesn’t get confirmation from the Depository Trust & Clearing Corp. that the clearinghouse will settle trades made on Jan. 7 and Jan. 8.

NYSE said it would also halt trading in closed-end funds and in exchange-traded products listed on its NYSE Arca exchange if they hold banned stocks.

On Friday, China Unicom said it will release a statement in due course. China Mobile and China Telecom didn’t immediately respond to requests for comment.

An executive order signed by President Trump in November will block Americans from investing in a list of companies the U.S. government says supply and support China’s military, intelligence and security services. The ban starts on Jan. 11 and investors have until November to divest their holdings.

The list currently includes 35 companies—including China’s largest chip maker—as well as surveillance, aerospace, shipbuilding, construction and technology companies.

It wasn’t initially clear if the order covered subsidiaries as well as parent companies and U.S. government leaders clashed over how broad the blacklist should be, The Wall Street Journal reported in December.

However, this week, the Treasury Department said it would add subsidiaries to the blacklist if they were majority owned—or controlled—by a company that has been named. The Treasury’s Office of Foreign Assets Control, which handles economic sanctions, also said the ban covered derivatives and depositary receipts, as well as exchange-traded funds, index funds, and mutual funds.

Last month, index compilers including MSCI Inc., FTSE Russell and S&P Dow Jones Indices said they would remove some Chinese stocks from their benchmarks because of the order, though they didn’t exclude shares issued by subsidiaries and affiliates.

China Mobile, which has a market value of about $117 billion, wasn’t included on the original blacklist though its parent, China Mobile Communications Group, was. Its U.S. stock is thinly traded compared with its Hong Kong securities, FactSet data shows. About 2.1 million American depositary receipts traded daily on average over the last three months, compared with 34 million Hong Kong shares a day. Each ADR is equivalent to five ordinary shares in Hong Kong.

Other U.S. initiatives could also bring more delistings. Last month, Mr. Trump signed legislation that could have Chinese companies kicked off U.S. markets if American regulators can’t inspect their audits within three years. Some Chinese companies, including Alibaba Group Holding Ltd. and JD.com Inc., have already obtained secondary listings in Hong Kong, which could help blunt the impact of such an action.

Write to Chong Koh Ping at [email protected]

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

This post first appeared on wsj.com

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