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Nicolas Asfouri / AFP through Getty Images
The new year has brought another issue of China-based whiplash to U.S. investors, with the New York Stock Exchange reversing its decision late Monday to shut down three Chinese telecoms companies just days after for them to decide to do so.
To make matters worse, Finance Secretary Steve Mnuchin was not too pleased with NYSE’s dramatic turnaround, according to Bloomberg News, which called two people familiar with the case.
Add backwards and forwards in the US questions about your future
Alibaba Group holds
(ticker: BABA) – and even where co – founder Jack Ma – is amid higher regulatory pressures within China and there is reason for investors in Chinese stocks to push for more volatility.
Shares of the three Chinese telecoms companies that the New York Stock Exchange intended to deliver—
China Mobile
(CHL),
Telecom China
(CHA) and
Unicom China
(CHU) – on Tuesday morning after the exchange reversed its decision, announcing further consultation with the Foreign Asset Control Office (OFAC) within the Treasury Department. Last week, the exchange said it would hand over the companies, announcing a regulatory order in November that banned U.S. investment in 35 companies said by the Pentagon to have ties to the Chinese military – the parent introduction of the three publicly traded telcos. Investors and U.S. currencies would have until Nov. 11 to dispose of their shares as ordered.
Analysts have again noted that the impact of action orders from the Trump administration will come down to coercion. And that depends on which interior of the administration wins – the slower voices of China or those trying to strike a better balance between a tight stance on China and a market – based product. It looks like the last one, for now.
The reversal of the exchange, and its statement that it occurred after communication with the relevant U.S. government authorities, strongly suggests that the administration instructed the exchange to issue a permit to allow transactions in it. the future shares of the three listed companies, says Paul. Leder, a former director of the SEC’s Office of International Affairs and now a consultant at Miller & Chevalier.
It is not yet clear how the new administration will handle some of the China-based moves introduced a few weeks ago, with most policymakers expecting the Biden administration to take a more coherent and multifaceted that may not only negate some of these actions but take them. a more nuanced approach.
For investors, especially retail investors, the orders have caused a lot of upheaval as fewer investors scratched on Monday to respond, just to find a turnaround a day later.
These trends come as many larger investors see a reason to increase more Chinese stocks in their long-term records, noting the growth opportunities in an emerging economy. recovering ahead of others and how China invests strongly domestically.
But risks are likely to increase – and investment could be more complex, especially for smaller investors trying to overcome individual securities among other potential factors. . Other problems included: recent breaches of legislation focused on oversight scrutiny, and sanctions or measures that may be related to human rights concerns.
Then there are more regulatory risks within China that have raised questions about the future of Alibaba and fintech fam Ant Group – and even where Alibaba’s co-founder is ubiquitous and China’s richest man. Ma has escaped the public eye, with his last public appearance at the Shanghai finance forum now where he criticized Chinese regulators ’approach to fintech innovation – comments that followed regulators torpedoing plans IPO Ant.
Alibaba shares have fallen 24% since IP’s Ant was pulled in early November, with many long-term investors saying the stock is attractive. But there is likely to be short-term volatility as Wall Street seeks to rebalance growth prospects – and assess the political risk to the internet companies far and wide.
Asset managers have played the worst cases, noting the importance of the internet sector, home to some of the most recognizable winners and globally, to China. The recent regulatory measures to put internet companies in the hands of the state are very unlikely, according to a messenger note from Andrew Batson, Gavekal’s China research director.
“A fall in business confidence in the private sector would be devastating for China,” Batson writes. “It would be much simpler and more confusing for the government just to tell the internet companies how it wants them to behave.”
While the worst case scenario may not play out, Batson says the internet sector would see lower growth opportunities. In the past, internet companies have stepped away from regulatory pressure with their growth path relatively complete, Batson said this is unlikely to be the case this time, with the government on definitely move away from their light-hearted approach to signals that may limit it. and even reversed the rapid expansion of some of the big tech companies.
For Ant, that could mean some of his recent purchases. But it could also cause Ma trouble. “While nationalism can be largely eradicated, it is not so easy to dispel a different kind of concern: that the Chinese government is now engaged in a political vendetta against Jack Ma , ”Writes Batson.
The worst case scenario Batson paints: What happened to If he looks like a Russian oligarch Mikhail Khodorkovsky, who was imprisoned and saw his Yukos oil company dismantled after the President Vladimir Putin to be a political rival. But Batson believes Ma ‘s imprisonment and Alibaba’ s dismissal are far too costly.
However, there is still a long way to go between the best and worst conditions for investors to settle – all in addition to how US-China relations play out. Add to that the Chinese stock market, CSI 300, closing at a 13-year level on Tuesday could be a reason to be cautious in the short term around Chinese stocks.
Write to Reshma Kapadia at [email protected]