Late last week, the NYSE said it would delist China Mobile, China Unicom, and China Telecom, consistent with Donald Trump’s November executive order banning US investments in a list of Chinese companies owned or operated by the PLA.
On Monday evening, in an abrupt about-face, the exchange changed its mind. The three companies will not be delisted after all. The NYSE cited “consultation with relevant regulatory authorities.”
NYSE Regulation will “continue to evaluate the applicability of [the] executive order to these issuers and their continued listing status,” a statement said.
Since the initial announcement, on New Year’s Eve, market participants have speculated about the prospect that Chinese oil majors could be next. Those concerns won’t disappear overnight, despite the backtracking from NYSE.
Read more: Delistings After Three Years Of Decoupling
The Pentagon last month confirmed the Trump administration would add CNOOC to the list of at-risk firms, along with SMIC, China Construction Technology, and China International Engineering Consulting.
Shares of China’s largest offshore oil producer have suffered at various intervals in connection with jitters around Sino-US tensions. In December, for example, the stock had its worst week since March after being added to the US Defense Department’s qualifying entities list.
At one point Monday, CNOOC slid nearly 6% in Hong Kong, before closing down just 1.8% on the session. Amusingly, the company claimed it had no idea why the shares came under “unusual” pressure.
Hua Chunying, China’s fireball of a Foreign Ministry spokeswoman, offered a characteristically scathing rejoinder to Trump coming off the weekend. Alluding to the (now scrapped) delisting of the country’s telco giants in New York, she called the administration’s decrees “a serious violation of the principle of market competition and international trade rules.”
As noted here Friday, there was no real operational threat to the telcos from the prospective NYSE delisting. Still, they all fell in Hong Kong trade Monday before eventually trimming losses, mirroring similar reversals in the oil majors.
While some analysts were quick to note that institutional interest in the companies is typically expressed in the Hong Kong-traded shares (the figure above, which I believe to be accurate, gives you a sense of things), there’s still something to be said for the move to curtail access to US capital markets.
On Bloomberg’s data, Chinese corporates managed a record haul from US IPOs and follow-ons in 2020.
When you tally up the market cap of Chinese companies that have US-listed shares, you get nearly $2 trillion. But focusing on that figure is misleading. As Bloomberg wrote Monday, citing China’s securities regulator, the impact on the telcos would be minimal were they delisted. “The affected shares… account for at most 2.2% of the total shares in each company.”
Still, the optics weren’t great. And, again, the issue is that the drama underscored the “decoupling” narrative.
That was not music to the ears of Wall Street, which could see hard-fought inroads to China cut off if the US continues to push the issue. In the same vein, there are retaliation concerns for US companies with operations in China.
Ultimately, the evolution of Sino-US relations, whether on matters of capital markets, the economy, or otherwise, will depend on Joe Biden’s penchant for “normalizing” ties — whatever “normal” means in this context.