BlackRock joins global funds in divesting Chinese telecoms stocks as US sanctions kick in

iShares ETFs have adjusted and will continue to be responsive in accordance with treatment of securities impacted by recent US sanctions
BlackRock was the second-largest holder of China Telecom shares and owned minor stakes China Mobile and China Unicom, as of last week

US sanctions on China

Bloomberg

Published: 1:00pm, 12 Jan 2021

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BlackRock, the world’s biggest money manager, has been selling stakes in three Chinese telecommunication providers after the US put them on its sanctions list and an investment ban kicked in from this week.

The firm reduced its holdings in China Mobile, China Telecom and China Unicom in recent weeks and plans to keep selling, according to a person with knowledge of the matter. One of the biggest investors in the companies, BlackRock is responding to the executive order issued by President Donald Trump in November barring US persons from investments in companies deemed to be owned or controlled by China’s military.

The mandate was part of Trump’s effort to clamp down on China in the twilight of his presidency. His administration has sought to sever economic links and deny Chinese companies access to American capital and technology, especially those judged to pose a threat to US national security. The order prompted the New York Stock Exchange to delist the telecom companies’ American depositary receipts.

New York-based BlackRock, which managed US$7.81 trillion at the end of September, has advised exchange-traded fund clients of changes under way.

“iShares ETFs have adjusted and will continue to be responsive in accordance with their respective indexes’ treatment of securities impacted by recent US sanctions on certain Chinese companies,” it said. “Our funds continue to function as designed, seeking to track the performance of their indexes, trading efficiently and offering daily transparency to holdings.”

A spokeswoman declined to comment further.

Chinese companies affected by the ban are also being removed from indices run by MSCI, S&P Dow Jones Indices and FTSE Russell. China has responded to the US sanctions by imposing a new set of rules to penalise persons or companies that comply with the ban.

Pain for investors, pensioners as Tracker Fund stops buying sanctioned stocks

BlackRock was the second-largest holder of China Telecom shares with a 7 per cent stake as of Wednesday, according to data compiled by Bloomberg. It owned 0.2 per cent of both China Mobile and China Unicom shares as of Friday.

05:04

Unique market position of ‘Made in Hong Kong’ companies vanishes under US relabelling order

Other fund managers are rushing to comply with Trump’s order. Wheaton, Illinois-based First Trust on Monday filed a supplement to the prospectus for several funds that hold these stocks, including First Trust Nasdaq Technology Dividend Index Fund, saying the companies cited in the order would be removed from their portfolios.

Goldman Sachs, Morgan Stanley and JPMorgan plan to delist 500 structured products in Hong Kong, recent filings show. The city is the world’s biggest market for such contracts, with more than 12,000 of them, according to Hong Kong Exchanges & Clearing, the bourse operator.

The US$14 billion Tracker Fund, Hong Kong’s most actively traded ETF managed by State Street Global Advisors Asia, won’t make new investments in companies covered by the US ban, saying the ETF is no longer appropriate for US investors.

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