Caixin
Dec 16, 2020 06:04 AM
BUSINESS & TECH

Nasdaq to Remove Four Chinese Companies From Indexes

The move makes Nasdaq another global index compiler to scrap Chinese stocks from their benchmark indexes
The move makes Nasdaq another global index compiler to scrap Chinese stocks from their benchmark indexes

Nasdaq plans to remove shares of four Chinese companies from its indexes, joining other index compilers acting in response to a Trump administration order to bar American investors from trading stocks allegedly linked to the Chinese military.

China Communications Construction Co., China Railway Construction Corp., CRRC Corp. and Semiconductor Manufacturing International Corp. will be dropped from Nasdaq’s indexes Dec. 21, Nasdaq said. The companies are not traded on the U.S. bourse.

The move makes Nasdaq another global index compiler to scrap Chinese stocks from their benchmark indexes after President Donald Trump signed an executive order last month barring U.S. investment in companies said to be linked to the People’s Liberation Army.

FTSE Russell was the first major index provider to respond to the ban, announcing Dec. 4 that it would remove eight Chinese companies’ stocks from several of its global indexes effective Dec. 21. China Communications Construction, China Railway Construction and CRRC were also on the FTSE Russell list. More Chinese stocks may be removed in the future, and sanctioned companies will be considered for reinclusion in indexes only after 12 months from the date of removal, the company said.

S&P Dow Jones Indices LLC (S&P DJI), an arm of U.S. financial conglomerate S&P Global Inc., said last week that it would remove 10 Chinese companies’ stocks from more than 50 of its equity indexes beginning Dec. 21. In addition, securities issued by 18 Chinese companies will be taken out of its fixed-income indexes Jan. 1.

MSCI Inc., another major index compiler, hasn’t disclosed any moves involving Chinese shares. The company said Nov. 20 that it was evaluating the impact of the order.

Trump signed an executive order in November restricting American investors from purchasing securities of companies blacklisted for alleged ties to the Chinese military, taking effect Jan. 11. The blacklist, unveiled in June by the U.S. Defense Department, contains 35 Chinese companies including Huawei Technologies Co., China Mobile and China Telecom.

China’s Foreign Ministry opposed the U.S. government’s move to force the exclusion of Chinese companies from major indexes.

"China urges the U.S. government to stop politicizing economic and trade issues and stop wrongful actions of abusing state power and over generalizing the concept of national security in cracking down on foreign companies," Wang Wenbin, a spokesperson for the ministry, told a routine press conference Monday in Beijing.

Wang said China's capital market will continue to open up, and the removal will not affect foreign investors’ interest in buying stocks of Chinese companies.

China has been pushing forward the inclusion of its stocks and bonds in global indexes in hopes of attracting trillions of dollars of passive investment into its capital market.

Analysts said the recent string of removals may disturb foreign capital inflows into China’s stock market in the short term and is likely to spur selloffs of blacklisted shares, although the overall, long-term impact will be relatively small.

As of the end of September, overseas holdings of Chinese stocks stood at about 2.75 trillion yuan ($420 billion), equivalent to 4.7% (link in Chinese) of mainland-listed equities, up from 4.15% at the end of March.

Luo Meihan contributed to this story.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

Download our app to receive breaking news alerts and read the news on the go.

You've accessed an article available only to subscribers
VIEW OPTIONS
Share this article
Open WeChat and scan the QR code