Factbox: Benchmark index providers remove Chinese firms after US investment ban

China State Construction International Holdings

22/12/2020 11:03

Dec 22 (Reuters) - Global index providers have cut Chinese
companies named in a 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  urn:newsml:reuters.com:*:nL1N2IW04H, FTSE Russell  urn:newsml:reuters.com:*:nL1N2IL008 and S&P Dow Jones
Indices  urn:newsml:reuters.com:*:nL1N2IQ0J0 so far:
    
WHAT HAPPENED?    
    * A Nov. 11 executive order from the White House https://www.whitehouse.gov/presidential-actions/executive-order-addressing-threat-securities-investments-finance-communist-chinese-military-companies
 banned Americans from investing in Chinese companies on a
Defense Department list https://www.defense.gov/Newsroom/Releases/Release/Article/2434513/dod-releases-list-of-additional-companies-in-accordance-with-section-1237-of-fy
 after January 11, 2021, and from holding exposure to them after
November 11, 2021.  urn:newsml:reuters.com:*:nL1N2HY2O7
    * 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.
    
INDEX RESPONSE
    * Twenty one of the affected companies are listed or have
subsidiaries which are listed in Hong Kong, Shanghai, Shenzhen
or New York. The rest are private.  urn:newsml:reuters.com:*:nL4N2IP2FU
    * Ten companies have or will be removed from equity indexes.
    * S&P DJI will remove 18 companies from bond indexes. FTSE
has not removed any securities from fixed income indexes.
    * Affected indexes include major benchmarks such as the FTSE
China A50  .FTXIN9  and China 50  .FTXIN25  and MSCI's China and
emerging markets indexes. MSCI said deletions amounted to 0.04%
of its all-country world investable market index by value, and
0.28% of its emerging markets IMI index.
    * Index makers have refrained from removing subsidiaries,
continuing to include the listed entities of CNOOC Ltd  0883.HK 
or China Mobile Ltd  0941.HK , for example, because they do not
believe those specific entities are on the Defense Dept. list.
    * MSCI deletions take effect on Jan. 5. FTSE & S&P DJI
equity deletions occurred on Dec. 21, except for SMIC
 0981.HK  688981.SS  and Hikvision  002415.SZ  which FTSE will
remove from major indexes on Jan. 7. S&P DJI fixed income
deletions occur on Jan. 1.
    * 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.

Here is a table of the equities removed by each index maker:
    
 Removed by MSCI,      Removed by FTSE      Removed by S&P Dow
 FTSE Russell and S&P  Russell and S&P Dow  Jones Indices only
 Dow Jones Indices     Jones Indices only   
 Semiconductor         China National       China State
 Manufacturing         Chemical             Construction
 International Corp    Engineering Co.      International
  0981.HK ,            Ltd.  601117.SS      Holdings Ltd
  688981.SS                                  3311.HK 
 China Communications  China Nuclear        
 Construction Company  Engineering &        
  1800.HK ,            Construction         
  601800.SH            Corporation          
                        601611.SS           
 China Spacesat                             
  600118.SH                                 
 China Railway                              
 Construction                               
 Corporation                                
  1186.HK ,                                 
  601186.SH                                 
 CRRC Corp  1766.HK ,                       
  601766.SH                                 
 Hangzhou Hikvision                         
 Digital Technology                         
 Co Ltd  002415.SZ                          
 Dawning Information                        
 Industry Co                                
  603019.SH                                 
 
S&P Dow Jones Indices will also delete bonds issued by the
following companies' from its fixed income indexes:    
    
 Company                                        Issuer RIC
 China Communications Construction Co Ltd        601800.SS  
 China Nuclear Engineering & Construction        601611.SS 
 Corp                                           
 CRRC Corp Ltd                                   601766.SS  
 Semiconductor Manufacturing International       0981.HK 
 Corp (SMIC)                                    
 China Railway Construction Corp Ltd             601186.SS  
 China National Chemical Engineering Group      
 Corp Ltd                                       
 Aviation Industry Corporation of China Ltd      SASADY.UL  
 China Aerospace Science and Industry Corp Ltd   SASAAI.UL  
 China Aerospace Science and Technology Corp     CNAST.UL  
 China Electronics Corp                          CELEC.UL  
 China Electronics Technology Group Corp         SASAFF.UL  
 China General Nuclear Power Corp               
 China National Chemical Corp Ltd                CNNCC.UL  
 China National Nuclear Corp                     CNNNC.UL  
 China Shipbuilding Industry Corp Ltd            CSBIC.UL  
 China South Industries Group Co Ltd             CSIGC.UL  
 China State Shipbuilding Corp Ltd               SASACN.UL  
 China Three Gorges Group                       
 
 (Compiled by Tom Westbrook in Singapore; Editing by Kirsten
Donovan)
 ((tom.westbrook@tr.com; +65 6318 4876;))