China’s three telecoms operators face sell-off as New York Stock Exchange moves to delist their depositary receipts

NYSE announces plan to delist ADRs of China’s three big telcos to comply with a ban on so-called Communist Chinese military companies

Their ADRs and stocks have slumped up to 39 per cent in 2020 from the pandemic and US actions to restrict investment and trade involving blacklisted firms

Reading Time:3 minutes

The New York Stock Exchange will delist China Mobile and peers China Unicom and China Telecom from January 7 to comply with Trump’s executive order. Photo: AFP

Published: 5:00pm, 1 Jan 2021Updated: 12:32pm, 5 Jan 2021

The New York Stock Exchange’s decision to delist three Chinese telecommunications giants is likely to prompt investors to convert their holdings into securities traded in Hong Kong and stoke selling pressure on the city’s bourse, analysts said.

The move puts trading on the Hong Kong stock exchange under scrutiny after a year of steep losses as President Donald Trump ramped up action against several so-called state-controlled “Communist Chinese military companies” in 2020 in the waning days of his presidency. The move worsened US-China relations, already at an all-time low since the trade war, after curbs on Huawei Technologies to Semiconductor Manufacturing International Corp.

The US exchange will remove American depositary receipts (ADRs) issued by China Telecom, China Mobile and China Unicom some time between January 7 to 11 to comply with Trump’s November 12 executive order, according to a statement late on Thursday. A Treasury Department clarification last week defined the scope of the ban on US investors and the prohibited assets of the blacklisted Chinese firms and its units.

“Their securities have already fallen a lot since the executive order was first announced, especially in China Mobile’s case,” said Louis Tse Ming-kwong, managing director of Wealthy Securities in Hong Kong. “News of their delisting in the US is merely another step in the process, which the market had already anticipated.”

The ADRs, which represent the telcos’ ordinary shares, have lost about 40 per cent of their market value in New York last year. The ordinary shares in Hong Kong have also suffered the same fate, underperforming the broader market, as investors dumped them to protect their portfolio returns.

The average daily trading volume of China Mobile ADRs was 6.9 per cent of its H-shares in 2020, compared to 12 per cent for China Telecom and 9.9 per cent for China Unicom, according to Bloomberg data. Each of the ADRs represent five, 10 and 100 of the underlying ordinary shares, respectively.