NYSE announces U-turn over delisting of Chinese operators

• New York Stock Exchange was set to delist China’s three main operators
• Initial announcement made in early hours of 2021 had ratcheted up US/Sino tensions
• At 3am New York time, NYSE announces it has changed its mind
• Unlikely that this is an olive branch

The NYSE has had a change of heart over its planned delisting of China Mobile, China Telecom and China Unicom, announcing in the early hours of Tuesday morning that “in light of further consultation with relevant regulatory authorities in connection with Office of Foreign Assets Control FAQ 857, available here, NYSE Regulation has announced that it no longer intends to move forward with the delisting action that was announced on December 31, 2020.” 

No further explanation was given. 

As reported on Monday in our daily news roundup, the NYSE had originally announced after trading had ceased on 31 December that it was set to delist the trio in order to comply with an Executive Order that prohibits trading in any shares linked to the Chinese military. 

But that decision didn’t last long. 

As Bloomberg reports, the unexpected U-turn after less than five days has left investors who had on Monday offloaded their holdings in the Chinese operators with a quandary about whether to repurchase them and, no doubt, some questions about the credibility of the NYSE’s regulation team. 

While the shares represented on the NYSE (in the form of American Depository Shares, or ADSs) accounted for only 2% of the operator’s total issued share capital, the initial NYSE decision, perceived as an escalation of the US/Sino tensions, had freaked investors and also raised questions about other listings, particularly of Chinese oil companies. 

As a result, the share prices of all three Chinese operators not only dipped on the NYSE during Monday trading – China Mobile by 5.9%, China Telecom by 5.4% and China Unicom by 3.2% – but impacted trading on the Hong Kong Stock Exchange (HKSE), where the share prices of both China Mobile and China Telecom sunk by a few percentage points (though China Unicom’s stock was not impacted).

But the NYSE U-turn quickly resulted in a 6% hike in the share price of China Mobile on the Hong Kong Stock Exchange to HK$46.55, more than reversing the dip it suffered following the initial 31 December announcement.

China Telecom’s stock on the HKSE gained 3.35% in Tuesday trading to HK$2.16, reversing its Monday decline, while China Unicom gained 8.5% to HK$4.85 despite not having taken a hit on Monday.

Does the NYSE’s reversal signal a thawing in relations between the US and China? That seems very unlikely: Legal technicalities are a much more likely cause.

And there’s little prospect that a change in the White House later this month will do anything to reverse the standing of Huawei and ZTE in the US: Whatever his views might be, President elect Joe Biden must know weakening the Trump era message that Chinese technology is a security threat would be politically unwise and attract unwanted pressure and vitriol at a time when he will be aiming to gain the trust of the whole US electorate.

Instead, the focus will be on promoting and encouraging the use of domestic technology, as it will be in other markets too: India is another example but China has always been a market where local products are favoured in procurement decisions, as will be the case again this year as the three Chinese operators once again invest heavily in their 5G infrastructure. (See China preps further massive 5G expansion in 2021.)

And it’s only a few weeks since $1.9 billion of federal funds were earmarked to speed the removal of Huawei and ZTE equipment from US communications networks – don’t expect a U-turn there…

- Ray Le Maistre, Editorial Director, TelecomTV