D-Lister Forces Delistings After Three Years Of Decoupling

D-Lister Forces Delistings After Three Years Of Decoupling

Say goodbye to the US listings of China Mobile, China Unicom, and China Telecom.

The state-controlled firms will be booted from the NYSE as of January 11, consistent with Donald Trump’s executive order banning US investments in a list of Chinese companies owned or operated by the PLA.

“NYSE Regulation reached its decision that the Issuers are no longer suitable for listing pursuant to Listed Company Manual Section 802.01D in light of Executive Order 13959, which was signed on November 12, 2020,” the NYSE said, in a statement. “Subject to confirmation that DTCC will settle trades executed on trade date January 7 and January 8, 2021, the NYSE will suspend trading in CHA, CHL and CHU at 4:00 a.m. on January 11.”

The move, which was expected, is mostly symbolic. None of the three companies have any business operations in the US to speak of, and as Bloomberg noted, “their shares are thinly traded on the NYSE compared to their primary listings in Hong Kong.”

“Symbolic” is often used to denote proclamations or policies that have little to no real-world effect. And yet, “symbolic” actions run the gamut between meaningless and momentous. Sometimes, the symbolism is more important than the lack of any concrete ramifications.

Trump spent three years working to sever American ties with China, and while he never went all the way down the road to capital restrictions, he (angrily) drove several miles in that direction.

China hawks within the administration, and some former administration officials, advocated for a complete “decoupling” between the world’s two largest economies, a non-starter for rational people, but an idea that gained more than a little traction at the highest levels of government under Trump.

With that in mind, consider the history of the telecom listings, as briefly recounted by The New York Times on Friday:

China Mobile, the largest of the three companies [and one of the first major Chinese state-owned enterprises to sell shares in New York], first listed its shares in [the US] in 1997, at a pivotal time for the Chinese economy. Reform-minded officials in Beijing were trying to get economic growth back on track, after China’s 1989 crackdown on the Tiananmen Square protests frightened off foreign investors and delayed what the officials saw as necessary overhauls.

One such overhaul had to do with bloated state-owned enterprises. China’s leaders forced them to lay off workers and focus on profits and productivity. Listing shares in the United States, the thinking went, would make them more responsive to investors and more driven to focus on the bottom line.

It’s not that anyone should mourn the loss of these listings. Rather, it’s worth taking a moment to at least acknowledge that while this doesn’t fall on the “momentous” end of the spectrum as far as symbolic actions go, the move isn’t “meaningless” either.

In December, the Pentagon confirmed the Trump administration would add CNOOC, SMIC, China Construction Technology, and China International Engineering Consulting Corp to the list of firms controlled by the PLA, raising sanctions risks. It was the latest in a series of aggressive maneuvers by the Trump administration, which is keen to cement the outgoing president’s “tough on China” reputation and perhaps undermine early efforts at diplomacy under Joe Biden.

The follow through from the NYSE “highlights the faltering of long-established business ties between the US and China, which were set up over decades as China sought to internationalize and reform its state-run corporate behemoths,” the Times said, in the same linked Friday piece.

Trump, a “D-lister” prior to becoming president, is now a “delister” too.

This move adds to an already fraught backdrop, and as SCMP cautiously observed, it “puts trading on the Hong Kong stock exchange under scrutiny.”

One Hong Kong-based broker called the delistings “merely another step in the process, which the market had already anticipated.”

That’s true, but this “process,” broadly construed, is a lingering concern for market participants as every incremental move towards decoupling erodes the odds of reconciliation between the world’s two superpowers.


 

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