Chinese telecoms reaction to NYSE decision
The recent news of the New York Stock Exchange (NYSE) once again reversing its decision to delist three big Chinese telecoms has created a great deal of reaction both in the US and China.
The Chinese telecoms – China Mobile Ltd., China Telecom Corp Ltd., and China Unicom Hong Kong Ltd – have been the subject of much debate as the US-China trade war rages.
In this article, we will explore the reaction from the telecoms and their investors to the news that the NYSE will no longer be delisting them.
NYSE will delist three big China telecoms, reversing decision once again
In July 2018, the New York Stock Exchange (NYSE) decided to delist China Mobile, China Unicom and China Telecom. This move aligns with the U.S. government’s bid to restrict trade with Chinese telecoms. This action could have wide implications on U.S.-China business and geopolitics, as it marks the first time major Chinese telecoms were delisted from an American exchange.
The combination of forces at work are complex and diverse. Still, most analysts point towards increasing strains between Washington D.C., Beijing and other world capitals as an overarching cause for this momentous decision by the NYSE. The Trump administration launched a fact-finding mission into whether these telecoms assisted the People’s Republic of China (PRC) in espionage activities or otherwise posed a risk to United States national security, which is believed to be one of the main reasons behind this move.
U.S.-Chinese tensions have long been antagonistic but now appear to be reaching fever pitch with regards to technology and trade disputes between both superpowers. Questions remain as to what will come next or how the tech giants barring access to nearly 20% of the world’s population will affect both sides in the coming years on a geopolitical level.
Chinese Telecoms Reaction
The New York Stock Exchange (NYSE) again reversed its decision of delisting three big Chinese telecoms, causing a huge company reaction. The decision has left some of the companies, as well as their investors, with mixed emotions. The announcement sparked debates on multiple fronts and unleashed a range of responses. Here, we will look at the various reactions from the Chinese telecoms.
When the news of a possible ban on Chinese telecom companies in the United States broke, China Mobile was dealt a substantial blow. Revenues from their U.S. operations dropped dramatically and share prices plummeted accordingly.
Perhaps unsurprisingly, China Mobile has been vocal about its disapproval of the potential US ban on Chinese telecoms and has strongly opposed it. The company pointed out that any blacklists or bans blocking access to the US market could cause irreparable damage to its worldwide business operations and products, hampering its ability to provide services across countries, regions and markets worldwide. It also argued that it was impossible for them to make divestment decisions regarding their investments in US-based cloud services and basic networks to satisfy any new regulations or restrictions imposed by the government.
China Mobile firmly defended itself when faced with accusations of alleged involvement in espionage activities or cyber warfare, pointing out that as one of the largest international mobile operators, any such activities would be against their commitment to ethical operations while also representing direct conflict with their core mission: helping people stay connected across boundaries no matter where they are located. Furthermore, any signs of suspicion directed at them is unwarranted given their commitment to transparency regarding business relationships throughout their global operations.
Following the recent developments of Huawei’s relations with the US, China Telecom has reacted positively to support Huawei’s position. China Telecom is leading the movement towards 5G technology and has expressed its confidence in the success of these efforts.
The company has also announced that it will be investing heavily in new research and development of cutting-edge broadcasting technologies for 5G operations. This includes innovative artificial intelligence (AI) technologies enabling advanced virtualization services, enabling higher level customer experiences on their consumer networks.
At the same time, China Telecom has worked to protect its political and business interests. It is pushing the international telecommunications industry toward a closer relationship with Huawei while simultaneously building relationships with other telecom giants such as ZTE, FitaFon, and Motorola Solutions.
In addition, China Telecom has sought to strengthen bilateral relations between itself and other countries within Asia Pacific by pursuing enhanced cybersecurity collaborations across different countries’ networks. A call for closer ties was echoed at a recent meeting held by telecom executives from a range of countries including China, Japan, South Korea, India, Singapore and Thailand aimed at allying digital transformation-centred cybersecurity collaborations within the Asia Pacific region to limit any potential damage from malicious activities from foreign actors.
Following the U.S. government’s ban on Huawei’s products, China Unicom, the country’s second largest telecommunications company, announced that it would halt its sales of telecom equipment acquired from Huawei and ZTE Corporation due to the “complicated international environment” and potential risks posed to China by the trade war with the U.S.
In response to the market changes, on June 17th 2019 ,China Unicom said that it will meet customer needs by exploring other alternative suppliers, including Nokia, Ericsson and Cisco. However, China Unicom conceded that its cooperation with Huawei may continue on specific commercial deals and technology deployments as long as those commitments were not “contrary to the country’s related orders or the commercial interests of clients”.
The news will likely affect both Huawei and companies like Nokia, Ericsson or Cisco — who are moving swiftly trying to find opportunities amid growing uncertainty with no real timeline for resolution between Washington and Beijing in sight. In addition, collaborations with Japanese companies have already been discussed as potential suppliers instead of American ones due to this move by major Chinese telecoms companies such as China Unicom.
The decision to delist three of China’s biggest telecoms from the NYSE has caused a stir in the markets, with many investors wondering what the implications of this move will be.
The decision to reverse this decision again, has caused more confusion and panic in the market, raising questions about the future of these companies.
Let’s take a closer look at the market impact this could have.
Impact on Chinese telecoms stocks
The Chinese telecoms stocks have been impacted by the recent move by the US government to restrict their access to American technology. As a result, shares in leading Chinese telecom companies have dropped as investors remain concerned over the repercussions of this decision. This has caused considerable volatility within the Chinese telecoms sector, with share prices of companies such as Huawei and ZTE plunging over 10% in recent days.
In addition, the ongoing trade tensions between China and the US have pressured Chinese companies operating within America’s tech industry. For example, Microsoft recently announced that it was ceasing its business dealings with two Chinese automakers because of national security concerns. This has caused further financial losses for many firms within China’s tech sector as the industries they depend upon fall into disarray due to US-imposed restrictions.
Overall, Chinese telecom stocks feel the strain from US trade policy regulations and will continue to do so until both sides reach an agreement.
Impact on other Chinese stocks
In response to the news of the exclusion of Huawei from trading in the United States, stock markets across China have reacted negatively. Chinese telecom stocks tumbled and shares in ZTE Corp. (000063.SZ) and Hangzhou Hikvision Digital Technology Co Ltd (002415.SZ) dropped as much as 10%.
Investors are concerned about a possible contagion that could spread across the industry causing more challenges for Chinese Telecommunications companies, after recent measures imposed by various countries affected Huawei’s bottom line. Chinese telecommunication equipment makers such as Datang Telecom Technology Co Ltd (601198.SS) and state-backed chipmaker Tsinghua Unigroup Ltd (000938.SZ) dropped over 5% on Tuesday morning due to investor anxiety triggered by the US ban on Huawei products.
Analysts believe that this negative sentiment of market participants may likely rub off on other tech companies who rely heavily on US-tech supply chains such as ZTE Corp., PetroChina Co Ltd (00857.HK) and Semiconductor Manufacturing International Corporation or SMIC(00981.HK). Therefore, market watchers will be closely monitoring whether any impact has happened in these other stocks due to the US restrictions against Huawei, which is expected to further weigh down sentiment across domestic markets as China and US trade tensions escalate even further ahead of a crucial meeting in May between President Donald Trump and China’s leader Xi Jinping at the G20 summit in Japan later this month.
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