Three US banks to delist 500 HK-listed products

Move follows US ban on investments in firms Washington deems linked to China's military

US banks Goldman Sachs, JPMorgan and Morgan Stanley said in filings to the Stock Exchange of Hong Kong that the products affected by the latest US ban are linked to telecoms companies China Mobile, China Unicom and China Telecom, or local indexes inc
US banks Goldman Sachs, JPMorgan and Morgan Stanley said in filings to the Stock Exchange of Hong Kong that the products affected by the latest US ban are linked to telecoms companies China Mobile, China Unicom and China Telecom, or local indexes including the benchmark Hang Seng Index.PHOTO: EPA-EFE

HONG KONG • US banks Goldman Sachs, JPMorgan and Morgan Stanley will delist 500 Hong Kong-listed structured products, following a United States ban on investments in companies Washington deems linked to China's military.

This comes after China continued to push back on US sanctions by publishing new rules over the weekend to protect its firms from "unjustified" foreign laws, allowing Chinese courts to punish global companies for complying with foreign restrictions and sanctions.

The products affected by the latest US ban are linked to telecommunications companies China Mobile, China Telecom and China Unicom, or local indexes including the benchmark Hang Seng Index, the three investment banks said in filings to the Stock Exchange of Hong Kong on Sunday evening.

The delistings follow statements last week by the Office of Foreign Assets Control (Ofac) clarifying a November order from President Donald Trump that banned Americans from investing in Chinese companies that the US considers to have links with China's military.

The Ofac guidance cited in some of the filings said the three telecoms companies were specifically included in the initial executive order.

Bourse operator Hong Kong Exchanges and Clearing said in a statement that it was "working closely with the relevant issuers to ensure orderly delisting, and facilitate buyback arrangements being arranged by the issuers".

There are more than 12,000 structured products listed in Hong Kong issued by 15 companies.

Hong Kong's markets watchdog, the Securities and Futures Commission, said it had stressed to the investment banks that "any action taken by them should be necessary, fair, and having regard to the best interest of investors and integrity of the market, and that investors should also be properly informed as appropriate".

Index providers MSCI, FTSE Russell and S&P Dow Jones Indices said last week they would cut the three Chinese telecoms companies from benchmarks, wiping a combined US$5.6 billion (S$7.5 billion) off the value of their Hong Kong-traded shares last Friday.

The New York Stock Exchange - after some flip-flopping - last week said it would delist the three firms' US-traded American Depositary Receipts yesterday.

China's Foreign Ministry has previously said it firmly opposes what it called US abuse of its power to oppress Chinese firms.

But, in another blow, Hong Kong's original stock market tracker said yesterday it would make no new investments in firms listed by Washington as having links to China's military.

The Tracker Fund of Hong Kong (TraHK) said in a statement to the stock exchange: "In the light of the executive order, TraHK will not make any new investments in a sanctioned entity with effect from Jan 11. TraHK is no longer appropriate for US persons to invest in."

TraHK, which has some US$14 billion in assets, was set up by Hong Kong's government following the 1998 Asian financial crash and is the city's biggest exchange-traded fund.

It is run by the Asian arm of State Street Global Advisors, a US asset management firm.

REUTERS, AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on January 12, 2021, with the headline 'Three US banks to delist 500 HK-listed products'. Print Edition | Subscribe