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The New York Stock Exchange has abruptly reversed plans to delist three major Chinese telecommunications companies after consulting regulators about an investment ban ordered by President Donald Trump.
Coming days before the companies were to be delisted – and just over two weeks before Trump is to leave the White House – the U-turn avoids a step that threatened to heighten U.S.-China tensions further.
The Big Board gave no reason for its decision in a statement released during Asian hours, saying only that it had consulted “relevant regulatory authorities” about Trump’s executive order, signed in November as part of his administration’s push to check China’s growing economic power.
The about-face, described as “bizarre” by a Jefferies Financial Group Inc. analyst, whipsawed investors who on Monday had sold shares of the Chinese telecom companies and raced to bet on which stocks might be delisted next. China Mobile Ltd., China Telecom Corp. and China Unicom Hong Kong Ltd. all rallied on Tuesday.
NYSE Says it No Longer Plans to Delist Chinese Telco Giants
WATCH: The NYSE says it no longer plans to delist Chinese telco giants.(Source: Bloomberg)
A lack of clarity on why NYSE changed course left investors to speculate over whether it was simply a result of the exchange initially misinterpreting the November executive order, or something with broader geopolitical implications.
The episode has added to a sense of confusion surrounding implementation of Trump’s order in the waning days of his administration. Index providers FTSE Russell, MSCI Inc. and S&P Dow Jones Indices have all said in the past month they would remove some Chinese companies from equity gauges to comply with the order, but their lists of affected stocks have sometimes differed markedly.
Read more: China Mobile May Dodge Index Exclusion After NYSE U-Turn
The stakes are high for both Chinese and U.S. companies. The former have long turned to America’s stock market for capital and international prestige, raising at least $144 billion over more than two decades. Their U.S. counterparts, meanwhile, are keen to avoid any ratcheting up of tensions that might curb their access to China’s vast economy. Wall Street banks, in particular, have been pouring resources into the country after gaining unprecedented scope to operate there last year.
The NYSE’s reversal was “quite unexpected,” said Jackson Wong, director of asset management at Amber Hill Capital Ltd. in Hong Kong. “Some funds that had an obligation to unload these shares will now need to buy them back. Some investors are also starting to price in a scenario that the decision to halt delistings could be the start of a de-escalation in tensions between China and the U.S.”
Calls and emails to the media department of the China Securities Regulatory Commission weren’t immediately returned Tuesday. The CSRC had responded to NYSE’s initial plan by calling it groundless and “not a wise move.” A spokesperson for the U.S. Treasury Department declined to comment. Spokespeople for the White House, the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority didn’t immediately reply to requests for comment.
It’s unclear whether NYSE’s reversal will have any impact on index providers, which help guide investments worth trillions of dollars. FTSE Russell declined to comment on Tuesday, while MSCI and S&P Dow Jones couldn’t immediately be reached. Bloomberg LP, the parent of Bloomberg News, also compiles stock and bond indexes.
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In separate statements, China Mobile, China Telecom and Unicom said they will continue to monitor developments. China Mobile, the largest of the three, jumped 5.1% in Hong Kong on Tuesday. The company’s NYSE-listed shares were up 11% at 9:49 a.m. in New York, while China Unicom’s U.S. shares surged 16%.