In a statement, Morgan Stanley, and Goldman Sachs JPMorgan said, they will delist 500 Hong Kong-listed structured products following a U.S. ban on investments in companies Washington has labeled as deemed to be linked to the Chinese military.
The Hong Kong listed products are linked to Chinese companies including China Telecom, China Mobile, and China Unicom said Hong Kong based local indexes including the benchmark Hang Seng Index.
The development comes in the wake of the U.S. Office of Foreign Assets Control (OFAC) clarifying a November 2020 directive from U.S. President Donald Trump banning U.S. investments in Chinese companies that Washington thinks are either owned or are controlled by the Chinese military.
The three Chinese telecom companies were specifically named in Trump’s initial executive order.
In a statement Hong Kong stock exchange operator Hong Kong Exchanges and Clearing said, it was “working closely with the relevant issuers to ensure orderly delisting, and facilitate buyback arrangements being arranged by the issuers.”
There are more than 12,000 structured products listed in Hong Kong issued by 15 companies.
In a statement, Hong Kong’s markets watchdog, the Securities and Futures Commission said, “any action taken by them [the U.S. investment banks] should be necessary, fair, and having regard to the best interest of investors and integrity of the market, and that investors should also be properly informed as appropriate.”
Last week, U.S. index providers FTSE Russell, MSCI Inc and S&P Dow Jones Indices had said, they would remove the three Chinese telecom companies from benchmarks; this would result in the wiping out a combined $5.6 billion from the value of their Hong Kong-traded shares as of Friday.