US investment banks are in the process of delisting Hong Kong-listed structured products that have been linked to companies sanctioned under a new executive order from President Donald Trump.
Goldman Sachs, Morgan Stanley and JPMorgan have all announced that they will delist a total of 500 Hong Kong-listed structured products. This is according to filings from the Hong Kong stock exchange on Sunday. These structured products are connected to telecom companies China Mobile, China Telecom and China Unicorn.
The said executive order which is the basis for the delisting bans US citizens from investing in firms that the government has classified as linked with the Chinese military. At least 35 firms were targeted in the order, which charged them with enabling “the development and modernisation” of China’s armed force which “directly threatens” US security.
Effective 11th January at 09:30 EST, US investors will be barred from owning or trading securities in these banned companies. This order also covers pension funds and share ownership.
Companies sanctioned by the US for alleged links to the Chinese military will be delisted as the new rules come into force.
However, transactions made for the purpose of divesting ownership in the firms will still be allowed until 11 November.
Bourse operator Hong Kong Exchanges and Clearing put out an announcement claiming that it was “working closely with the relevant issuers to ensure orderly delisting, and facilitate buyback arrangements being arranged by the issuers.”
The operator added: “We do not believe this will have a material adverse impact on Hong Kong’s structured products market, the largest in the world with over 12,000 listed products.”
In a different statement released by US custodian bank State Street, they confirmed that an ETF it manages which tracks the Hang Seng Index will not make any new investments in sanctioned stocks, though it would maintain its existing shareholdings.
It was also noted in the statement that, according to information published by the US Office of Foreign Assets Control last week, the fund was no longer legalized for investment by US firms or individuals.
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