Saturday, 16 January 2021

Upcoming delisting of Chinese telcos from major financial indices sees share prices drop by almost $10bn

by Harry Baldock, Total Telecom
Friday 08 January 21

The MSCI Inc, FTSE Russell, and S & P Dow Jones indices have announced they will remove China Unicom, China Telecom, and China Mobile at the behest of US Defense Department

Back in November, President Donald Trump ordered that American’s will be banned from investing in Chinese companies deemed to have links to the Chinese military, according to the US Department of Defense. This ban will include all three of China&rsquo…

Back in November, President Donald Trump ordered that American’s will be banned from investing in Chinese companies deemed to have links to the Chinese military, according to the US Department of Defense. This ban will include all three of China’s major telecoms companies: China Telecom, China Unicom, and China Mobile.
 
Now, in separate statements yesterday, the MSCI Inc, FTSE Russell, and S & P Dow Jones indices all announced that they would be delisting the Chinese telcos in the coming days.As a result, passive investors in these companies are left with little choice but to sell their stocks.
 
Today, share prices for the three telcos fell heavily, wiping out around $10 billion in value.
 
While this may seem a huge blow to the Chinese telcos, experts expect that the shares will bounce back quickly, as non-US buyers swoop in to invest. Partially state-owned company Semiconductor Manufacturing International Corporation – China’s largest semiconductor firm – had a similar experience, seeing share value plummet when it was removed from the indices, but since bouncing back 35%.
 
On a political level, China has naturally decried what they call an attempt to suppress Chinese business, saying the move undermines US interests and the countries international reputation. 
 
But, with President Trump due to ignominiously hand over power to President-Elect Joe Biden in just a few weeks, it seems unlikely that China will retaliate significantly until it knows exactly how the new President will the two countries’ difficult international relationship. 
 
 
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