New York: The New York Stock Exchange said it will no longer delist China's three biggest state-owned telecommunications companies, backtracking on a plan that had threatened to escalate tensions between the world's largest economies.
NYSE's U-turn came with scant explanation just four days after the exchange said it would remove the shares to comply with a US executive order barring investments in businesses owned or controlled by the Chinese military. Citing "consultation with relevant regulatory authorities" for the reversal, NYSE declined to elaborate further.
In the lurch
The about-face, described as "bizarre" by a Jefferies Financial Group Inc. analyst, whipsawed investors who on Monday had sold shares of the telecom companies and raced to bet on which Chinese businesses might be delisted next. China Mobile Ltd., China Telecom Corp. and China Unicom Hong Kong Ltd. all rallied more than 7 per cent in Hong Kong trading on Tuesday. Cnooc Ltd., a state-owned oil producer also on the Pentagon's list of companies with Chinese military links, recouped some of Monday's losses as well.
A lack of clarity on why NYSE changed course left investors to speculate over whether it was simply a result of the exchange initially misinterpreting the executive order or something with broader geopolitical implications.
The stakes are high for both Chinese and US companies. The former have turned to the American stock market for capital and international prestige for more than two decades, raising at least $144 billion from some of the world's largest investors. US companies are keen to maintain their access to China's vast economy, especially Wall Street banks that gained unprecedented scope to operate in the country last year.
Broader geopolitical stakes?
NYSE's reversal was "quite unexpected," said Jackson Wong, director of asset management at Amber Hill Capital in Hong Kong. "Some funds that had an obligation to unload these shares will now need to buy them back. Some investors are also starting to pricing in a scenario that the decision to halt delistings could be a start of a de-escalation in tensions between China and the US."
In separate statements, China Telecom and Unicom said they will continue to monitor the developments, while China Mobile didn't respond to requests for comment.
On New Year's Eve, NYSE said it would delist the three companies to comply with a November order by US President Donald Trump. It was the first time an American exchange had announced plans to remove a Chinese company as a direct result of rising geopolitical tensions between the two superpowers.
The confounding developments have unfolded in the last few weeks of the Trump administration, which has long railed against China for what the US president calls unfair trading practices. Trump has imposed tariffs on imports from China and carried out an aggressive campaign against Chinese technology firms such as Huawei Technologies Co., among other measures.
With Joe Biden set to enter the White House, China has been seeking to avoid escalating the dispute with Washington.
"The Trump administration is leaving," said Orville Schell, director of the Asia Society's Center on US-China Relations. "That puts a big question mark over anything that is ordered during Trump's period of presidency."