Delisted from the New York Stock Exchange! The three major operators gave a "cold" treatment, and the Ministry of Commerce and the China Securities Regulatory Commission responded with a "response"

Affected by the New York Stock Exchange's decision to delist China's three major operators, the Hong Kong stocks of the three major operators all fell at the opening on the first trading day after the New Year.

Among them, China Telecom once fell by 5%, China Mobile once fell by more than 4%, and China Unicom once fell by about 3.5%.

In response to this matter, on January 4, 2020, the three major operators responded one after another, stating that they had not received any notification from the New York Stock Exchange's delisting decision.

At the same time, all three companies expressed regret over the New York Stock Exchange's decisions and actions.

Response from the three major operators

On December 31, 2020 (local time in the United States), the New York Stock Exchange (NYSE) issued a statement announcing that it has decided to initiate the delisting process for China's three major telecom operators.

On January 4, the three major operators separately issued announcements on the Hong Kong Stock Exchange, saying that they had noticed that the staff of the New York Stock Exchange's regulatory department had decided to initiate delisting procedures for the securities of three issuers, including the company's American depositary shares.

But at the same time, all three operators pointed out that they had not yet received any notification from the New York Stock Exchange regarding the decision to delist their American depositary shares.

According to the NYSE announcement, the specific delisting time will be between January 7 and January 11, 2021. In other words, no matter what, the NYSE will terminate the stock trading of the above three companies before 4 a.m. on January 11, 2021.

As for the specific process, China Telecom mentioned it in the announcement:

• The NYSE will suspend trading in the ADSs at 4:00 a.m. (EST) on January 7, 2021, or, if the Depository Trust & Clearing Corporation (DTCC) confirms that it will settle trades executed on trading days January 7 and January 8, 2021, then the NYSE will suspend trading in the ADSs at 4:00 a.m. (EST) on January 11, 2021.

Leifeng.com learned that China Mobile was listed in the United States in 1997 with the stock code CHL; China Unicom was listed in the United States in 2000 with the stock code CHU; China Telecom was listed in the United States in 2002 with the stock code CHA.

However, in addition to being listed on the New York Stock Exchange, China Unicom, China Telecom and China Mobile are also listed in Hong Kong, and their revenue basically comes from China. In the United States, apart from being listed on the New York Stock Exchange, they have basically no presence - therefore, Bloomberg stated that the NYSE's delisting of these three companies has more symbolic significance than practical significance.

This is more like a signal.

Chinese companies face severe challenges

It can be learned from the official statement that the management of the New York Stock Exchange made the above decision because of the executive order (Executive Order 13959) signed by US President Trump on November 12, 2020.

The executive order stipulates that starting at 9:30 a.m. Eastern Time on January 11, 2021, any U.S. entity is prohibited from purchasing publicly issued securities, derivative securities and other financial products of so-called "Chinese military-related enterprises."

It is understood that Section 1237 of the U.S. National Defense Authorization Act (NDAA) for Fiscal Year 1999 stipulates that the list of so-called "Chinese military-related enterprises" should be announced by the U.S. Secretary of Defense after consultation with the Secretary of Justice, the Director of the Central Intelligence Agency and the Director of the Federal Bureau of Investigation.

So far, many Chinese companies have been included in the above list, including large state-owned enterprises or central enterprises, as well as Huawei, SMIC, etc.

Of course, China’s three major telecom operators have already been included in the above list in batches.

Based on the above-mentioned background, the New York Stock Exchange stated that China's three major operators are no longer suitable to appear in the U.S. securities market, so it decided to delist them.

However, the delisting of the three major operators may just be the beginning.

The Wall Street Journal reported that other US measures may also cause Chinese companies to be delisted from US exchanges, including the Foreign Companies Accountability Act signed by Trump in December 2020.

It is worth noting that after Trump signed it, the bill has officially become US law.

Leifeng.com learned that there is a core clause in the "Foreign Companies Accountability Act": If a company cannot prove that it is not controlled by a foreign government, or the U.S. Public Company Accounting Oversight Board (PCAOB) is unable to audit it for three consecutive years, the company's securities will be banned from trading on U.S. exchanges.

In other words, this bill actually requires Chinese companies listed in the United States to be subject to three consecutive years of review by the PCAOB; and many Internet companies including Alibaba, JD.com, Pinduoduo and others are listed in the United States.

It is not difficult to imagine that Chinese companies will face even more severe challenges in the future in the United States.

The Ministry of Commerce and the China Securities Regulatory Commission jointly spoke out

Just two days after the United States announced its decision to delist the three major operators, on January 2, the spokesperson of the Ministry of Commerce expressed his views on the matter:

This practice of abusing national security and using state power to suppress Chinese companies is inconsistent with market rules and violates market logic. It not only damages the legitimate rights and interests of Chinese companies, but also damages the interests of investors from various countries including the United States, and will seriously undermine the confidence of all parties in the U.S. capital market.

At the same time, the Ministry of Commerce also stated that China will take necessary measures to resolutely safeguard the legitimate rights and interests of Chinese companies.

On January 3, the day after the Ministry of Commerce issued its position, the China Securities Regulatory Commission also expressed its views on the matter, also pointing out that the US move undermined normal market rules and order. The spokesperson of the China Securities Regulatory Commission said:

• The three Chinese companies have issued American Depositary Receipts (ADRs) and listed on the New York Stock Exchange for nearly or more than 20 years. They have always complied with U.S. securities market rules and regulatory requirements and are widely recognized by global investors.

The NYSE's direct announcement of the delisting of three companies was triggered by the US government's executive order against so-called "military-related companies." The US implemented the executive order for political purposes, completely ignoring the actual situation of the relevant companies and the legitimate rights and interests of global investors, and seriously undermined normal market rules and order.

At the same time, the CSRC also expressed its support for the three companies to safeguard their own rights and interests in accordance with the law, and believed that they would be able to properly deal with the adverse effects caused by administrative orders and delisting measures.

As for the impact of being delisted, the spokesperson of the China Securities Regulatory Commission also mentioned:

• The three companies have a large user base, stable fundamentals, and significant influence in the global telecommunications service industry. Their ADRs are not large in size, with a combined market value of less than RMB 20 billion, accounting for only 2.2% of the total share capital of the three companies, of which China Telecom only has about RMB 800 million and China Unicom only has about RMB 1.2 billion. The liquidity is insufficient, the trading volume is small, and the financing function is missing. Even if they are delisted, the direct impact on the company's development and market operation is quite limited.

However, it should be pointed out that although the delisting has limited direct impact on the development and market operation of the three major operators, it reflects deeper meanings behind it.

As Felix Salmon, author of the American media website Axios, said:

• Since its blockbuster IPO in 1997, China Mobile has been a mainstay on the New York Stock Exchange… Its listing in the United States was a major step forward in the globalization of capital markets – but now, its ignominious departure shows that the deglobalization of capital markets has truly begun.

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