The New York Stock Exchange (NYSE) made another turnabout and will push through with the delisting of three Chinese telecoms stocks.
On Monday, the NYSE announced that it has thrown out its previous decision on the delisting of the Chinese telecoms firms. The delisting was a result of President Donald Trump’s executive order in November, which prohibits US investments in Chinese firms owned or controlled by the military.
Trump's executive order and the delisting
On November 12, 2020, President Trump issued an executive order which prohibited "any transaction in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of any Communist Chinese military company by any US person."
The US Department of Defense came up with a list of Chinese companies it deemed to have military ties. The list included three Chinese telecoms.
The delisting of China Mobile, China Telecom and China Unicom was previously announced by the NYSE on December 31. However, the NYSE said on Monday that it abandoned its previous decision based on "further consultation" with regulatory authorities.
First turnabout
Regarding the NYSE's first decision to abandon the delisting, Jeffrey Halley, a senior market analyst from Oanda, argued: "I suspect that the NYSE never wanted to delist these stocks in the first place. They acted on guidance regarding the executive order."
"That interpretation has clearly changed and the NYSE has moved quickly to change course," he continued.
Halley concluded: "These are the acts of a dying administration and China will probably be content to await President Biden, and more clarity then over the general path of US China relations from the new administration."
However, the exchange just announced that it will go back to its original decision of delisting the aforementioned companies due to "new specific guidance" from the US Treasury Department that was delivered on Tuesday.
The recent rescindment of the delisting boosted share prices of the telecoms firms. Shares of China Unicom surged by 8.5%, while China Telecom increased by 8%. On the other hand, China Mobile’s stock rebounded by 7% after the NYSE announcement.
But the new decision caused China Telecom's stock to fall by 3.7%, while China Mobile went down by 2.7%. Shares in China Unicom declined by 2.3%.
Worsening US-China trade relations
According to the Chinese government, the US is "wantonly suppressing foreign companies listed in the country" and that it will take "necessary measures" to protect the interests of Chinese firms.
The delisting is just part of the Trump administration's broader campaign against China's technology industry.
Last December, Commerce Department added China’s top chipmaker Semiconductor Manufacturing International Corporation (SMIC) to a so-called Entity List that bans it from using US suppliers and technology.
Commerce Secretary Wilbur Ross said: "We will not allow advanced US technology to help build the military of an increasingly belligerent adversary." Secretary Ross added that SMIC "perfectly illustrates" the risks of China using US technology to modernize its military.
The chipmaker has previously denied its alleged relationship with the Chinese military.
The addition of SMIC to the list would pose serious problems with the firm, as it relies heavily on US software, machinery and other equipment to design and manufacture its semiconductors.
