Saturday, December 9, 2023

FTSE Russell drops eight Chinese companies from indexes after Trump order

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Index provider FTSE Russell said it would remove eight companies designated by the U.S. government as having ties to the Chinese military from some of its indexes. Donald Trump banned American investors hold stakes in companies.

FTSE Russell said the companies – which include China Railway Construction Corporation, China Communications Construction Company and Hikvision, a manufacturer of surveillance cameras – will be removed from its FTSE global stock indexes and the FTSE China A Inclusion index on December 21.

Mr Trump last month signed an executive order prohibiting US citizens and businesses from buying shares in companies linked to the Chinese military from Jan.11, just days before Joe Biden was inaugurated as as the next US president. The order gave current investors in the affected companies until November 2021 to sell their shares.

Widely owned companies such as China Mobile and China National Offshore Oil Corporation were not on the list of companies that FTSE Russell said it would remove from its indexes.

The benchmark operator has said it will remove other companies from its indexes if the Office of Foreign Assets Control, the Treasury Department body that oversees and enforces U.S. sanctions, releases an official list of banned companies.

The deletions follow consultation with index subscribers, FTSE Russell said. It has not yet decided on the effect of the new US sanctions on its bond indices.

Other index providers are still evaluating Mr. Trump’s executive order and its effect on their benchmarks. MSCI, whose emerging market indices are particularly followed by investors, told the Financial Times that it could make a decision on withdrawals from its indices as early as next week. The Nasdaq is also assessing the issue and may release its conclusion next week

The eight groups to pull out of FTSE indices ranged in market value from $ 3 billion to $ 66 billion. The list also includes: China National Chemical Engineering Company; China Spacesat satellite manufacturer; the China Nuclear Engineering Corporation; manufacturer of computer servers Dawning Information Industry Group; and the locomotive builder CRRC.

The United States has taken a plus strong position with China this year in areas such as securities regulation, human rights violations and cyber espionage.

Congress this week passed legislation this could prompt a wave of Chinese companies that trade on US exchanges to pull out if they fail to meet US accounting standards. This would constitute a violation of Chinese law.


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