The U-turn of the New York Stock Exchange on delistings from China Telecom could be reversed

The New York Stock Exchange is rethinking its plan to allow three Chinese telecommunications giants to be listed. This is the latest twist in the face of confusion over the rules set by the Trump administration and tensions within Washington over China policy.

If so, it would mean a second sudden U-turn. The exchange said late Monday it had reversed a decision announced last week to delist China Mobile, China Telecom and China Unicom (Hong Kong) after consulting with regulators related to the U.S. Treasury Department for overseas wealth control.

The turnaround was due to ambiguity over an executive order issued by President Donald Trump precluding investment in companies Washington says are tied to the Chinese military and whether the order banned the three companies, a source familiar with the matter said on Tuesday with.

However, now the delistings scheduled on or before Jan. 11 will be carried out if companies believe they are subject to the order, said the person who asked to remain anonymous as discussions are still ongoing.

Bloomberg reported earlier that the NYSE could fly back.

U.S. Treasury Secretary Steven Mnuchin called New York Stock Exchange President Stacey Cunningham Tuesday to tell her he disagreed with the operator’s decision to reverse course on the delistings, a separate source said.

In the final days of the Trump presidency, the back-and-forth on the NYSE underscored the lack of clarity and associated tension over the implementation and impact of the government’s investment ban on 35 Chinese companies.

A China expert who has worked with Congress on delisting issues said the NYSE may have turned around if they asked the Treasury Department for clarity on the rules and told them not to delist.

Republican Senator and Chinese hardliner Marco Rubio expressed indignation that the US Treasury Department may have induced the NYSE to withdraw the delisting process.

“If it is true that someone at (Treasury) (NYSE) advised reversing the decision to delist these Chinese companies, it has been an outrageous effort to undermine (President Trump’s) executive order,” he tweeted .

The Treasury Department declined to comment on the NYSE decision. OFAC, which is responsible for enforcing sanctions, declined to comment.

The NYSE is owned by the Atlanta-based Intercontinental Exchange (ICE), which is run by billionaire Jeffrey Sprecher, whose wife Kelly Loeffler, also a former ICE executive, is one of two Republican senators facing the runoff election in Georgia Tuesday. Loeffler is a staunch supporter of President Trump.

New guard

The flip-flop on the big board also caused confusion among investors.

Tariq Dennison, chief executive officer of GFM Asset Management in Hong Kong, said he had almost entirely closed his positions in China Mobile stocks in Hong Kong and New York in an effort to find investments for U.S. clients who are less exposed to risks related to the company Investment ban.

There are also questions about how the order is being handled by President-elect Joe Biden, who will take office on January 20th and could easily revoke it. His transition team has not commented on the plans for the policy.

William Kirby, a Harvard Business School professor specializing in China, said Monday that while the Trump administration has taken a “one-size-fits-all” approach to regulating Chinese companies, the Biden administration has likely taken corporations for business would have. Company valuations.

Miller said that while policies on investment flows in Chinese companies were tightened last year, “many of these rules are likely to fall by the wayside”.

Flip flops

The executive order, which bans US investors from buying shares in companies that Washington claims is owned or controlled by the Chinese military, goes into effect in November 2021.

While the directive doesn’t enforce delisting, a law signed by Trump in November will kick Chinese companies off U.S. exchanges if they fail to fully comply with the country’s auditing rules in three years.

The executive order caused index makers like FTSE Russell and MSCI Inc to remove a dozen Chinese companies from their benchmarks, but none removed the three telecom companies, all of which have large passive US funds among their major shareholders.

The three telecommunications companies said they had read the NYSE’s recent announcement and would publish information in accordance with regulations, adding that investors should be aware of investment risks.

China’s State Department has condemned what it called the US’s expansion of the concept of national security to suppress Chinese businesses.

On Tuesday it was reiterated that the United States’ status as an international financial center rests on the confidence that global companies and investors have in the certainty of their rules.

© Thomson Reuters 2020

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