Index cuts wipe $5.6bn off Chinese telcos' Hong Kong trading

08 January 2021 | Melanie Mingas

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It's been a challenging week for China's TMT players, but it looks like things will get worse before they get better.

Yesterday the New York Stock Exchange again reversed its policy on listed Chinese telcos, confirming that it would de-list the entities.

As Capacity reported, the decision – impacting China Mobile, China Telecom and China Unicom – followed President Donald Trump’s executive order in November 2020 that identified all three as having connections with the Chinese military.

Now, following the NYSE's lead, index providers MSCI Inc, FTSE Russell and S&P Dow Jones are to cut the three from their benchmarks.

The decision wiped a combined $5.6 billion off the value of their Hong Kong-traded shares during trading today.

Reuters calculated that China Mobile shares closed down 4%, their lowest level since 2006, while China Telecom shares dropped 3% to a 12-year low. China Unicom finished down 0.9%. All three stocks have lost more than 20% since Trump’s November order.

MSCI has said it will remove the three companies from its China indexes today, while FTSE Russell said they would be cut from its Global Equity Index series and China A Inclusion indexes on Monday.

NYSE will delete depository receipts for the three Chinese telcos on Monday, while S&P Dow Jones Indices will remove the Hong Kong-traded stocks of the three firms, as well as fixed income securities of China Telecom and China United Network Communications Co Ltd on Tuesday.

Meanwhile, even in China authorities appear to be turning against the country's tech giants.

Last month the government warned the likes of Alibaba Group and Tencent Holdings to prepare for greater scrutiny.

Then yesterday, the internet regulator China Consumers Association (CCA), claimed that "consumers are being squeezed by data algorithms and becoming the targets of technical bullying".

CCA said Chinese internet companies must stop using consumer's personal data to target them for advertising and promotions.

CCA is currently seeking public consultation on regulations it first published in the year 2000, which would expand its remit. Resulting amendments aim to "widen its oversight of online services to cover payment, shopping and livestreaming platforms".

Via WeChat, CCA said it wanted to "promote the healthy and orderly development of internet information services" in the country. Comments are invited until 7 February.