MSCI Drops Chinese Stocks on U.S. Blacklist
December 16 2020 - 1:28AM
Dow Jones News
By Chong Koh Ping
MSCI Inc. will strip its indexes of stocks in seven Chinese
companies that the U.S. government says help China's military,
including the country's largest chip maker and a major producer of
surveillance equipment.
The move, which will take effect by the close of business on
Jan. 5, follows similar actions by other benchmark providers
including FTSE Russell and S&P Dow Jones Indices. It will
affect 10 securities that trade in either Hong Kong, Shanghai or
Shenzhen.
Last month, President Trump signed an executive order barring
Americans from investing in 31 Chinese companies that the U.S.
Defense Department says supply and otherwise support China's
military, intelligence and security services.
In a statement after U.S. markets closed Tuesday, MSCI said its
list only includes securities issued by companies explicitly named
in the order, but not those from subsidiaries or affiliated
companies.
That means some of the largest stocks that could potentially
have been affected by the order--such as China Mobile Ltd., which
has a roughly $117 billion market value--have been spared, and the
overall impact on indexes will be limited. FTSE Russell and S&P
Dow Jones took a similar approach.
MSCI said the affected stocks made up 0.04% of its All Country
World Investable Market Index and 0.28% of the emerging-markets
equivalent. They include Semiconductor Manufacturing International
Corp., China's largest chip manufacturer, and Hangzhou Hikvision
Digital Technology Co., a Shenzhen-listed surveillance
specialist.
MSCI said it had heard from more than 100 market participants,
and respondents said it would be hard for international
institutional investors to invest in these 10 stocks.
"In particular, non-U.S. market participants noted that the
extensive presence of U.S. entities, such as commercial banks,
broker-dealers, and custodians, within their chain of financial
intermediaries would significantly limit their ability to transact
in the impacted securities, " it said.
On Wednesday in Hong Kong, shares in China Communications
Construction Co., China Railway Construction Corp. and CRRC Corp.,
three of the named stocks, fell more than 1% by midday, while the
city's Hang Seng Index added 0.8%. The same companies'
Shanghai-listed shares inched down by less than 0.3%.
MSCI will finalize its list on Dec. 30, meaning it could expand
if U.S. authorities name any other companies between now and Dec.
29.
Write to Chong Koh Ping at chong.kohping@wsj.com
(END) Dow Jones Newswires
December 16, 2020 01:13 ET (06:13 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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