Factbox: Benchmark index providers remove Chinese firms after U.S. investment ban - Telenor

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January 5, 2021

Factbox: Benchmark index providers remove Chinese firms after U.S. investment ban


(Reuters) Global index providers have cut Chinese companies named in a U.S. Defense Department list from their benchmarks following a U.S. government order forbidding investors in the United States from investing in them.


Their removal affects billions of dollars in exchange traded funds and other passive investments tracking the benchmarks.


Here is an overview of the actions of index companies MSCI Inc, FTSE Russell and S&P Dow Jones Indices so far:


WHAT HAPPENED?


* A Nov. 11 executive order from the White House banned Americans from investing in Chinese companies on a Defense Department list after Jan. 11, 2021, and from holding exposure to them after Nov. 11, 2021.


* There are 35 firms on the list and the Defense Department says they have links to the Chinese military, an assertion many of the companies deny and which China’s government has said lacks evidence.


* The New York Stock Exchange announced and then reversed a move to delist three Chinese telecom companies with links to firms on the list.


INDEX RESPONSE


* Twenty four of the affected companies had affiliates listed on major exchange in December, according to the U.S. State Department.


* A total of 12 different companies have been or will be removed from equity indexes. MSCI has removed nine, S&P DJI 10 and FTSE Russell 11.


* S&P DJI removed 18 companies from bond indexes. FTSE has not removed any securities from fixed income indexes.


* Affected indexes include global benchmarks as well as China indexes such as the FTSE China A50 and China 50. MSCI said deletions amounted to 1.13% of its popular China All Shares investable market index by value.


* Index makers have refrained from removing subsidiaries, and still include the listed entities of CNOOC Ltd and China Mobile Ltd, for example, because they do not believe those specific entities are on the Defense Dept. list.


* MSCI deletions took effect on Jan. 5. FTSE & S&P DJI equity deletions occurred on Dec. 21, except for SMIC, Nanjing Panda Electronics, China United Network Communications and Hikvision, which FTSE will remove from major indexes on Jan. 7. S&P DJI fixed income deletions occurred on Jan. 1.


* MSCI and FTSE Russell mostly removed only A-share, or mainland, and H-share, or Hong Kong, listings. S&P DJI also deleted some U.S.-traded American Depositary Receipts (ADRs).


* Investors are waiting for further details from the Office of Foreign Assets Control, the enforcement agency of the U.S. Treasury, which may prompt further deletions.


Source: Reuters; Compiled by Tom Westbrook in Singapore and Samuel Shen in Shanghai; Editing by Kirsten Donovan and Mark Potter

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