This Wednesday, the New York Stock Exchange (NYSE) confirmed that it will exclude from its list China Mobile, China Unicom, and China Telecom, in compliance with the executive order issued by the US Government, where American investors are prohibited from investing in more than 35 companies from China, since, according to the White House, these would be financing operations of the Chinese Army.
On Tuesday, the NYSE announced that it would stop the process of excluding Chinese telecommunications companies China Mobile, China Unicom, and China Telecom, a decision that went against the executive order signed by President Donald Trump. The Treasury Department discouraged the NYSE board from continuing the decision to keep the three communications companies on its list on the same day.
The executive order states that the People’s Republic of China “exploits U.S. investors to finance the development and modernization of its armed forces.”
More than 35 companies, including China Mobile, China Unicom, and China Telecom, are under this designation. According to the order, investors would have had to begin selling these Chinese companies’ shares on January 11th and would have had until November 2021 to sell all of their stock holdings and assets.
What are China Mobile, China Unicom, and China Telecom?
Due to the size of China’s population, China Mobile is now the largest cell phone service provider in the world. It outperforms American companies such as AT&T and Horizon in size, with a market capitalization of $126.109 billion. The company currently has more than 946 million users or 59% of the Chinese market, the remaining percentage being shared between China Unicom and China Telecom.
For its part, China Unicom, the fourth-largest mobile phone operator in the world, had more than 319 million users in China by 2019, making it the second-largest telephone operator in that country. China Telecom, on the other hand, is the main landline company and the third-largest cell phone provider, with a market capitalization of $23,744 million.
These companies are owned by the Chinese government, which tightly controls the telecommunications business in its country, and there is little or no room for companies outside of state control.
What does excluding Chinese phone companies from NYSE list means?
The exclusion of shares in Chinese companies from the NYSE means that US investors will have to sell their shares in these companies by November 2021, at least for now. This news has increased investor optimism, which has led to higher share prices for these companies.
Despite the increase in shares after the NYSE decision, the reversal of this decision would be a significant blow to companies with mediocre behavior in stock markets since they will not have American investors’ capital. Despite Tuesday’s rally, China Mobile’s shares have fallen 29% in the last 12 months, China Telecom has fallen 30%, and China Unicom 32%.
The NYSE said it reconsidered Tuesday’s decision because “the exclusion of the three Chinese companies comes after receiving new guidance from the Treasury Department,” in compliance with President Trump’s executive order.
With the NYSE’s decision to comply with the executive order, China Mobile, China Unicom, and China Telecom will no longer be a safe investment, affecting their transaction even on other stock exchanges, such as those in London and Hong Kong.
American investors will have to sell their assets represented in the Chinese telecom companies quickly. The most experienced investors recommended proceeding with caution regarding the purchase of shares of these companies. China said the United States “changes its mind all the time,” and a Chinese Foreign Ministry official, Hua Chunying, said that “some politicians in the United States have been oppressing foreign companies listed in the United States.”