S&P Dow Jones Indices delists Chinese-military backed companies

On Thursday, in a significant development, S&P Dow Jones Indices said it would delist Chinese companies including Hikvision from its products, becoming the latest stock exchange to do so following the U.S. Administration ordering restrictions on the purchase of their shares.

In a statement, S&P DJI said it would remove A-shares, H-shares and ADRs of 10 companies including Hikvision and Semiconductor Manufacturing International Corp from all equity indices prior to the market open on December 21.

Neither Hikvision nor SMIC immediately responded to requests for comments.

“The order … may impact the ability of market participants to replicate S&P DJI Equity and Fixed Income indexes containing securities affected by the order,” said S&P DJI in a statement.

According to Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ Kokusai Asset Management, funds following the S&P indices “will have to sell. This goes beyond the routine annual changes to names on the index. Once the passive funds start selling, the active funds will be inclined to do the same.”

The development comes in the wake of FTSE Russell telling last week that it would remove eight Chinese companies from its products to comply with the U.S. executive order.

In a statement the company said, it had acted on feedback from index subscribers and other stakeholders. Unveiled in November, the executive order is designed to ward off U.S. pension funds, investment firms, and others from buying shares of Chinese companies designated by the Defense Department as backed by the Chinese military.

Categories: Creativity, Economy & Finance, Entrepreneurship, HR & Organization, Regulations & Legal, Strategy

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