Index providers SHANGHAI / SINGAPORE (Reuters) -Global MSCI Inc and FTSE Russell said they would cut three Chinese telecoms companies from their criteria in response to the U.S. investment ban, crushing share prices and expanding the result from U.S. sanctions.
The deletions add to the series of companies already cut from world indices due to the U.S. government’s ban and are likely to require passive investors, such as record-finding funds -found, sell the stocks.
In a statement dated January 7, FTSE Russell said it would remove China Mobile, China Telecom and China Unicom Hong Kong from the FTSE Global Equality Index Series, FTSE Global China A Inclusion Index and charts related goals. MSCI said it would remove them on Jan. 8.
Shares in the companies fell sharply, with China Mobile opening at an almost 15-year rate, China Telecom hitting a ten-year low and China Unicom showering a 10-month pool. There have been losses since then, but stocks are still down between 5% and 8% in morning trading.
Hang Seng’s broad index rose 0.4%. [.HK]
“If you’re a passive index provider, you definitely need to get out of the way,” said Kay Van Petersen, a global macro strategist at Saxo Capital Markets in Singapore.
“And of course if you’re active and you know the index providers need to get out of the way, you don’t just sit around while something is selling off.”
The removal of the index is in response to a November order from President Donald Trump banning Americans from investing in Chinese companies that the U.S. believes have ties to China’s military from November 2021 .
FTSE had already removed 11 other companies from their indexes and MSCI had cut nine. The New York Stock Exchange said Wednesday it would issue American Display Receipts of all three telecommunications on Jan. 11.
The latest deletions came after the U.S. Treasury department clarified that the investment ban extends to subsidiaries with similar names to 35 companies on the Department of Defense’s list of Chinese companies it says have links weapons.
China has described U.S. trends as unnecessary harassment of its companies.
Reporting with Andrew Galbraith and Samuel Shen in Shanghai and Tom Westbrook in Singapore; Edited by Christopher Cushing and Jacqueline Wong