Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

S&P DJI removes Chinese firms from indexes after U.S. order

Stock MarketsDec 10, 2020 04:30AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. A logo of Semiconductor Manufacturing International Corporation (SMIC) is seen at China International Semiconductor Expo (IC China 2020) following the coronavirus disease (COVID-19) outbreak in Shanghai 2/2

By Andrew Galbraith

SHANGHAI (Reuters) - S&P Dow Jones Indices on Thursday became the second major index provider to remove some Chinese companies from its index products following a Trump administration executive order, in the latest market disruption from persistent Sino-U.S. tensions.

Outgoing U.S. President Donald Trump's executive order, unveiled in November, is designed to deter U.S. investment firms, pension funds and others from buying shares of Chinese companies designated by the U.S. Defense Department as backed by the Chinese military.

S&P DJI said it would remove mainland-listed A-shares, Hong Kong-listed H-shares and American Depositary Receipts (ADRs) of 10 companies including Hangzhou Hikvision Digital Technology Co Ltd and Semiconductor Manufacturing International Corp (SMIC) from all equity indexes prior to the market open on Dec. 21.

The company said it will also remove securities issued by 18 Chinese companies from its fixed income indices before Jan. 1.

"The order ... may impact the ability of market participants to replicate S&P DJI Equity and Fixed Income Indices containing securities affected by the order," S&P DJI said in a statement.

A spokeswoman for Hikvision called the order's decision to pursue the firm "groundless."

"We strongly protested when Hikvision was included on this list in June because, as we have shown time and again, Hikvision is not a 'Chinese military company'," she said.

SMIC did not immediately respond to a request for comment.

FTSE Russell said last week that it would remove eight Chinese firms from its products to comply with the U.S. executive order, which bars U.S. investors from buying securities of blacklisted firms starting in November 2021.

The index providers' moves to comply with the U.S order effectively shut passive investors out of the stocks and bonds affected and could challenge investors' assumptions that a Joe Biden administration will mean a warmer relationship with China.

"It's significant and even more importantly it's not necessarily going to be unwound by the Biden administration," said Kay Van Petersen, global macro strategist at Saxo Capital Markets in Singapore.

"There are more ripples from it and it raises possible questions: What about Alibaba (NYSE:BABA), which is listed in the U.S. ... What if it was the other way around? How would people like those apples? And no-one's talking about that yet."

President-elect Biden has said he will not immediately cancel existing tariffs set by the Trump administration against China, and legislation taking a hard line on Chinese business and trade practices tends to have broad bipartisan support in Washington.

Last week, the U.S. House of Representatives unanimously passed a law to kick Chinese companies off U.S. stock exchanges if they do not fully comply with the country's auditing rules.

Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ (NYSE:MUFG) Kokusai Asset Management in Tokyo, said that funds following the S&P indices "will have to sell".

"This goes beyond the routine annual changes to names on the index," said Ishigane.

"Once the passive funds start selling, the active funds will be inclined to do the same."

China is firmly opposed to the removal of Chinese firms from indexes due to the U.S. executive order, foreign ministry spokeswoman Hua Chunying said.

"This is yet another example of how the United States uses the power of the state to oppress Chinese companies," she told a daily briefing on Thursday.

"We believe these endless lies and this suppression of Chinese firms will eventually work against U.S. interests," she said.

Hikvision shares in Shenzhen shrugged off the index announcement to close 2.95% higher on Thursday. SMIC's Shanghai shares closed up 1.08% and its Hong Kong shares ended flat on the day.

"Although foreign ownership in A-shares is rising, it remains relatively small, accounting for 4-5% in total," said Max Luo, director of asset allocation at UBS Asset Management in Shanghai.

"We're watching these developments closely, but we don't think these events will trigger major concern or panic in Chinese markets."

S&P DJI removes Chinese firms from indexes after U.S. order
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (5)
Zack Harding
Zack Harding Dec 10, 2020 5:32AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hunter and Joe going to prison.
Kaveh Sun
Kaveh Sun Dec 10, 2020 2:01AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Who cares. By China rule, western shareholders dont own chinese companies. They also list their companies on hk exchanges to sell to outsiders.
Anakin Skwk
Anakin_Skwk Dec 10, 2020 2:01AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Tesla owns its factory in Shanghai. And Goldman Sachs will own its 100% holding securities company in China soon.
William Chang
William Chang Dec 10, 2020 2:01AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
only companies in the blacklist affected, not all Chinese companies
David David
David9 Dec 10, 2020 1:41AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hikvision in Hong Kong gained 4% on this.
Usman Ibrahim
Usman Ibrahim Dec 10, 2020 12:24AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
🤣🤣🤣🤣
Axell Hernandez
Axell Hernandez Dec 09, 2020 11:57PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Does anyone knows which stocks?
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email