JPMorgan, Morgan Stanley and Goldman Sachs are expected to withdraw 500 structured products listed on the Hong Kong stock exchange, as the consequences of President Donald Trump’s executive order preventing investment in companies with alleged ties to the Chinese army increase.
During his last days in office, Trump tried to crack down on Beijing before Democratic President-elect Joe Biden was sworn in later this month.
In addition to banning the purchase of shares in dozens of Chinese companies believed to be linked to the People’s Liberation Army, the outgoing president also decided to restrict transactions with Chinese payment apps, including Alipay, WeChat Pay and Tencent’s QQ Wallet.
The action by JPMorgan, Morgan Stanley and Goldman Sachs follows a decision by MSCI on Friday to remove Chinese state-owned telecommunications companies China Mobile, China Telecom and China Unicom from their closely followed stock benchmarks in order to avoid possible penalties. from the requested executive, which is due to take effect on 11 January.
Hong Kong Exchanges and Clearing said the decision to remove 500 structured products was a “direct result” of US sanctions, adding that it would continue to monitor developments.
“HKEX is working closely with the relevant issuers to ensure orderly closure and to facilitate the repurchase arrangements being organized by the issuers,” said the statement on Sunday. “We do not believe that this will have a significant adverse impact on the Hong Kong structured products market, the largest in the world with more than 12,000 products listed.”
On Monday, the manager of the Hong Kong Tracker Fund, the city’s largest publicly traded equity fund, announced that it would not make new investments in a US-sanctioned company.
State Street Global Advisors, which closely follows the Hong Kong Hang Sang index, said it was “no longer appropriate for Americans” to invest.
The fund has shares on the Hong Kong lists of China Mobile and China Unicom, which are among the US blacklisted companies.
Last week, the New York Stock Exchange confirmed that the two companies, along with China Telecom, would be withdrawn from the stock exchange as a result of the sanctions.
The Hang Seng index rose 0.8 percent in morning trading.
In its efforts to avoid violating the same regulations, the New York Stock Exchange became involved in controversy, moving first to withdraw the three Chinese telecommunications companies and then reverse the course, before deciding to move on. last week at the request of the Treasury Department.
Lawyers and financial executives have criticized the Trump administration for introducing ambiguously formulated rules and guidance on how the restrictions will be enforced. Investors also expressed concern about the confusion sown in recent weeks.
“This type of uncertainty is not attractive to any long-term investor, especially when trying to invest in Chinese state-owned telecommunications companies,” said Deepak Puri, director of investments for the Americas at Deutsche Bank Wealth Management, in the midst of the turnaround. NYSE -flop last week.