NYSE returns course again to deliver Delcom Telecoms. Why the upheaval lasts.

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The New York Stock Exchange reappeared on Wednesday and returned to their original call to find three Chinese telecom companies, the latest signs of investors and upset companies finding themselves while sailing a series of wide-ranging action orders related to China. Adding the Whip: Politics.

Part of the upheaval revolves around the recall of some of the regulatory orders related to China, including the November order that the NYSE was trying to comply with. The order bans transactions in the securities of companies that the Department of Defense says have ties to the Chinese military, with the order taking effect on Jan. 11.

There has also been political jockeying in the final weeks of the Trump administration with many orders of action passed and others under consideration, including possibly adding

Alibaba Group holds

(BABA) and

Tencent Holding

(0700.Hong Kong) to the Department of Defense list, according to The Wall Street Journal.

Some of the upheaval surrounding the NYSE movement stems from political pressure to force financial institutions like the NYSE with some groups within the Trump administration advocating the harshest definition of the language of the order, and Treasury officials trying to make the process more orderly and interpreting it with less widespread language, said Paul Triolo, head of geotechnology use of the Eurasia Group via email.

“The inter-agency process for coordinating this type of policy decision was disorganized and there was no broad agreement on the policy objectives,” Triolo said.

The back and forth began major movements this week in American investment receipts of all three telcos,

Telecom China

(CHA),

China Mobile

(CHL) and

Unicom China

(CHU). Shares of Alibaba also fell 5% on reports that the company may end up on the Pentagon list. The movements serve as a reminder of the risk that investors need to be aware of, both in Chinese stocks as well as in U.S. companies that are caught in the middle of changing relationship between the USA and China.

“If the NYSE is struggling to determine the impact of this order and what should be done to comply, of course, the average investor is going to be disappointed. expansion, ”said Anna Ashton, vice president of government affairs at the U.S.-China Business Council.

It is unclear what prompted the exchange to initially deliver the companies based on the guidance issued by the Treasury Department on December 28. But the company reversed the course of their delisting decision following guidance received Jan. 4 from the Treasury’s Foreign Fund Control Office.

In the case there was uncertainty as to whether the telcos were subject to the order since they were not directly named on the list but are affiliated companies. But on Tuesday he received further instructions from the Treasury Department that the companies were in fact covered by the order, forcing him to return to their first delisting decision on Wednesday, according to someone familiar with the situation.

The bottom line for investors: it’s been a sad day or two of whiplash, with ADRs of China Mobile, China Unicom, and China Telecom swimming with every flip-flop, and bankruptcies and investors now scrambling to surrender.

U.S. investors will not be able to buy companies on the list, as of Jan. 11, although investors and money will still be able to hold or sell their ADRs until November, when the the order urging U.S. investors to move. The order also applies to currencies, over-the-counter stocks, as well as registered versions of Hong Kong securities.

Many large funds are already complying with the order. And while lawyers and analysts do not note a simple comparison for such a measure, they point out that these ADRs represent about 2% to 4% of the total flowers of the distant those Chinese-communications. Of course, the delisting is not expected to have a major impact on company fundamentals – but foreign investors, not those in the U.S., are best placed to take advantage of any opportunity.

Overall, the stock exchange’s flip-flop highlights the challenges we face for companies – and investors – as the U.S.-China relationship grows. Take the latest regulatory order threatening a new ban of eight China-linked apps, including Ant Group-owned Alipay, and apps owned by Tencent Holdings. Although these apps do not have a large presence in the US, many American companies rely on them for their work in China. If this is known, this is because an earlier order also threatened to ban Tencent ‘s WeChat – a measure that was staged in court.

The order announced today will not take effect for another 45 days, raising the question of what the new administration will do on this front. And if other companies – such as Alibaba or Tencent that are widely held – were added to the Department of Defense list, it would be up to the new administration to implement an extended ban.

That said, there may be little political will in easing China because of the latest developments – including the arrest of U.S. citizens and dozens more under its new security law in Hong Kong, China. blocking a World Health Organization team investigating the source of the coronavirus and Chinese regulators pressuring Ant Group to share user data.

“There is a lot of room for interpretation and for Biden to apply them in a more consistent, secure and transparent way. But it is very likely that many regulatory orders related to China would not be reversed, especially with the kinds of actions that China has been taking recently, ”says Ashton.

U.S. investors looking for opportunities in China may want to choose asset managers who can travel through the increasingly deceptive waters – and stay vigilant.

Write to Reshma Kapadia at [email protected]