Daily Management Review

After NYSE Delisting Announcement, China Telco Shares Lost 5% In Hong Kong


After NYSE Delisting Announcement, China Telco Shares Lost 5% In Hong Kong
After the New York Stock Exchange (NYSE) said last week that it would delist China’s three biggest telcos from the exchange under a plan that was branded “political” and of “limited” impact by China, there was a drop of as much as 5 per cent in the shares of the three companies at the Hong Kong exchange on Monday where the companies are also listed.
China Mobile Ltd, China Telecom Corp Ltd and China Unicom Hong Kong Ltd would be delisted from its stock exchange, the NYSE said on Thursday. This was to conform to the move by the United States government in November last year to ban US investments in 31 companies that it found to be either owned or under the control of the Chinese military.
The US plan was “politically motivated”, said the China Securities Regulatory Commission in reply to a question-and-answer posted on its website on Sunday.
It said that move of the US “completely disregards the actual situation of the relevant companies and the legitimate rights and interests of global investors and severely undermines normal market rules”.
The regulator said that the American Deposit Receipts listed by the three telcos have a total market value of less than 20 billion yuan or $3.07 billion, which is equivalent to 2.2 per cent of the total equity of the companies.
“Even if delisted, the direct impact on the companies’ development and market operation is quite limited,” it said.
There was a 4.5 per cent decline in China Mobile’s shares in Hong Kong on Monday which was its lowest price since July 2007. On the other hand, drops of 5.6 per cent and 3.4 per cent were also experienced by the shares of China Telecom and China Unicom respectively compared to a 0.8 per cent fall in the benchmark Hang Seng Index.
They had not received any delisting notification from the NYSE, the three companies have said.
The delisting decision matched expectations, said Citic Securities analysts in a research note. “The three firms on average only have 1.5% of their shares listed in the U.S. and the rest in Hong Kong, have ample liquidity, and haven’t done any fundraising in the U.S. for 20 years. Having shares listed in the U.S. will only pose more risk for them.”
In recent weeks, there has been a toughening of its hard-line stance against China by the administration of the outgoing US president Donald Trump. Dozens of Chinese companies were added to a trade blacklist in December by the US Commerce Department over allegations that China used those companies to gain access to civilian technology and use them for military purposes.
It would take “necessary measures” to safeguard the interests of Chinese companies, China’s commerce ministry said on Sunday.
“In recent years it’s been quite normal to see Chinese firms delist in the U.S. or have secondary listings in Hong Kong,” Citic analysts wrote on Monday. “With the delisting, the three telcos will get a chance to have their shares re-evaluated and reduce financial disclosure cost.”