BUSINESS US crippling its financial dominance by elbowing out Chinese telcos: experts

BUSINESS

US crippling its financial dominance by elbowing out Chinese telcos: experts

Global Times

20:36, May 09, 2021

A China Mobile employee adjusts and tests 5G base station equipment at Tongling Railway Station in East China's Anhui Province on April 27. Photo: cnsphoto

Three Chinese telecom giants have announced that they expect their American depositary receipts (ADRs) to be delisted from the New York Stock Exchange (NYSE) soon, reflecting a brewing trend of US segregation of US-listed Chinese companies, which experts said will erode the US' dominant role in the global capital market in the long run.

In separate filings by China Mobile, China Unicom and China Telecom on Friday, the companies said that they expected the NYSE to apply to the US Securities and Exchange Commission for permission to delist their ADRs. The companies said that the delisting will be effective 10 days after the application is submitted.

The delisting is in line with an executive order signed by former US President Donald Trump in November 2020, barring Americans from investing in Chinese companies that Washington accused of having ties to Chinese military and security services. The three Chinese telecom carriers had earlier asked the NYSE to reconsider the delisting decision.

Fu Liang, an independent telecom analyst in Beijing, said that for the three telecom giants, remaining on the US market would be of little value for their businesses, considering that their trading volumes are very small and there have been no refinancings in about a decade. Likewise, delisting of the three companies would not have too much direct impact on the NYSE itself.

However, what's more important is that the removal reflects an increasingly tough environment in the US capital markets for Chinese companies, which would make Chinese companies more and more reluctant to list on US stock markets - that would cripple the US capital markets' competence, Fu told the Global Times on Sunday.

"The US is weakening its role as the world's financial leader, as its segregation of rising Chinese tech giants would cause capital to flow away from it to some of its competitors that are willing to embrace those companies," said Fu.

Among the three companies, China Mobile has not yet disclosed whether it is planning to list on the Chinese A-share markets. China Telecom said recently that it has applied to list its shares in Shanghai, while China Unicom shares are already trading in Shanghai. All of the three companies are currently listed in Hong Kong.

According to Fu, as China Mobile has sufficient cash flow, it is not certain whether the company is in a rush to get listed on mainland stock exchanges, but it may push its subsidiaries like Migu to go public to promote their brand image and market presence.

But he said that China Telecom's listing might bring some fluctuation to the stock price of its peer China Unicom, as investors would refer to China's Telecom's share price when they make trading decisions related to China Unicom, and some capital might be drawn away from the latter.

The share price of China Mobile fell 0.1 percent to HK$50 ($6.44) on Friday. Shares of China Telecom rose 2.14 percent, while shares of China Unicorn fell 0.22 percent.

Fu said the companies' share prices would not be too volatile after the delisting.

"I don't see any reason why investors would dump their shares as their general situation has not changed. If there is such a trend, the companies will likely repurchase their shares to stabilize the price," Fu said, adding that their businesses, like in the 5G field, would not be affected as the capital involved in the delisting is limited.

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