S&P DJI removes Chinese firms from indexes after U.S. order

Reuters ^ | DECEMBER 10, 2020 | Andrew Galbraith

[BeauBo]

S&P Dow Jones Indices on Thursday became the second major index provider to remove some Chinese companies from its index products following a Trump administration executive order...

President Donald Trump’s executive order, unveiled in November, is designed to deter U.S. investment firms, pension funds and others from buying shares of Chinese companies designated by the U.S. Defense Department as backed by the Chinese military.

S&P DJI said it would remove mainland-listed A-shares, Hong Kong-listed H-shares and American Depositary Receipts (ADRs) of 10 companies including Hangzhou Hikvision Digital Technology Co Ltd and Semiconductor Manufacturing International Corp (SMIC) from all equity indexes prior to the market open on Dec. 21.

The company said it will also remove securities issued by 18 Chinese companies from its fixed income indices before Jan. 1...

Last week, the U.S. House of Representatives unanimously passed a law to kick Chinese companies off U.S. stock exchanges if they do not fully comply with the country’s auditing rules.

Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ Kokusai Asset Management in Tokyo, said that funds following the S&P indices “will have to sell”.

“This goes beyond the routine annual changes to names on the index,” said Ishigane.

“Once the passive funds start selling, the active funds will be inclined to do the same.”

[BeauBo]

This reduces Western funding of Chinese Military/Intelligence somewhat, but also protects American investors from being stuck with the bad debt and fraudulently overvalued equity of these unaudited Chinese companies.

[BeauBo]

China ping for you.

[Blurb2350]

It’s too bad all CCP companies can’t be delisted from all US exchanges. The Chinese love, love, love money, and this would hit them right where they live.

[reegs]

Is this truly a cold war with China, or are things beginning to warm up?

[Old Teufel Hunden]

I don’t know why they wouldn’t have to follow standard rules American publicly traded companies have to follow to get on our stock market indices (such as standard auditing procedures). It’s there to protect our investors.

[entropy12]

China loves dominating the world even more than money.

A millennium ago, China was the world’s dominant economic power for a thousand years. China has not forgotten that history and wants to get back in that position.

[BeauBo]

“Is this truly a cold war with China, or are things beginning to warm up?”

It is developing into a Cold War, but if Harris/Biden take over the Presidency, it will quickly shift into a Chinese victory.

[glorgau]

Removing them from the indexes will probably cause a minor hit in share price. It means that the many index funds will not have to buy shares in order to mirror the indexes.