NYSE to Delist China’s Major Telecom Operators

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

The NYSE decision is the latest setback for U.S. investors in these companies, which rank among the largest global telecommunications providers but have largely lagged behind the broader markets since the companies began listing here more than two decades ago.

The exchange’s decision is unlikely to seriously harm the Chinese telecom giants in the near term. Mounting pressure from Washington has already stymied their ability to operate in the U.S., a country that makes up a negligible amount of their international business.

The top three service providers still benefit from hundreds of millions of customers in their home country. That has attracted investors to their Chinese-listed shares. The cellphone carriers have spent billions of dollars on new fifth-generation wireless networks over the past two years with support from officials in Beijing, who have called 5G upgrades a national priority.

A China Telecom spokesman had no immediate comment.

The broader U.S. market impact of the delistings is likely to be limited, in part because large telecom companies haven’t been a hot part of the market recently and in part because these companies will continue to be traded in Hong Kong, where they are more closely followed by analysts and investors.

At the same time, the imminent delisting of several major Chinese companies will get the attention of portfolio managers, after a yearslong push to ensure Chinese firms’ compliance with U.S. audit rules. While the final outcome of that effort is unclear, the NYSE decision underscores the fraught politics of the U.S.-China relationship as the Trump administration comes to a close.

“The delisting issue is a live one with financial clients,” said

Leland Miller,

chief executive of China Beige Book International, which provides data on China’s economy to international investors. “There are some jittery people out there.”

NYSE said it would suspend trading in securities issued by China Mobile, China Telecom and China Unicom by Jan. 11. 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 would release a statement in due course. China Mobile 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 themselves of 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 whether 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, the Treasury Department said recently that 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’s 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 past 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 Inc.,

have already obtained secondary listings in Hong Kong, which could help blunt the impact of such an action.

Since their listing on the NYSE, after the privatization of its predecessor in 1997, China Mobile’s U.S. shares have returned 648%, compared with 501% for the S&P 500, according to Dow Jones Market Data. But the company’s market performance and that of its Chinese peers have fallen in recent years.

U.S. shares in China Mobile, the largest of the three companies by market value, declined 29% over the past year, according to FactSet, while China Telecom dropped 30% and China Unicom fell 39%. Over the same span, the S&P 500 index returned 18% and the communications-services sector of the MSCI World Index rose 22%. All figures reflect total returns, including dividends.

Over the past decade, China Mobile shares have declined 15% including dividend payments, FactSet data show, while China Telecom has dropped 32% and China Unicom has fallen 54%. The S&P 500 has gained 267% on the same basis and the MSCI World communications sector has gained 165%.

Write to Chong Koh Ping at [email protected] and Drew FitzGerald at [email protected]

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