Picture: 123RF/EVGENII BASHTA
Picture: 123RF/EVGENII BASHTA

Hong Kong/Singapore — Chinese oil majors may be next in line for delisting in the US after the New York Stock Exchange (NYSE) said last week it would remove the Asian nation’s three biggest telecom companies.

China’s largest offshore oil producer Cnooc could be most at risk as it’s on the Pentagon’s list of companies it says are owned or controlled by Chinese military, according to Bloomberg Intelligence analyst Henik Fung. PetroChina and China Petroleum & Chemical Corporation, also known as Sinopec, may also be under threat as the energy sector is crucial to China’s military, he said.

“More Chinese companies could get delisted in the US and the oil majors could come as the next wave,” said Steven Leung, executive director at UOB Kay Hian in Hong Kong. At the same time, the effect of removing the telecom firms is probably minimal as they were thinly traded in the US and they haven’t raised much funds there, he said.

A Sinopec spokesperson declined to comment. Cnooc and PetroChina didn’t immediately comment, though Cnooc said in a Hong Kong exchange filing it was not aware of any reasons for the “unusual” drop in its share price on Monday. Cnooc fell 1.8% on Monday while PetroChina was unchanged. Sinopec rose 1.7%.

The three firms are mostly traded in Hong Kong, though they each have American depository receipts (ADRs) listed in New York. Trading volumes are much higher in Hong Kong, according to exchange data.

“The bottom line is the impact will be very limited,” said Neil Beveridge, an analyst with Sanford C Bernstein in Hong Kong. “Most institutional investors invest through the Hong Kong shares rather than the US ADRs. The biggest downside for investors would be the loss of transparency from SEC [US security and exchange commission] filings.”

Cnooc’s appearance on the Pentagon list is possibly due to its drilling activity in the fraught South China Sea, said Leo Ho, an analyst with Daiwa Capital Markets. If that’s the case, PetroChina and Sinopec would be at less risk of US action, he said.

The NYSE said it would delist the telecom operators to comply with a US executive order imposing restrictions on companies identified as affiliated with the Chinese military. China Mobile, China Telecom and China Unicom Hong Kong would all be suspended from trading between January 7 and January 11, and proceedings to delist them have started, the exchange said.

US President Donald Trump signed an order in November barring US investments in Chinese firms owned or controlled by the military in a bid to pressure Beijing over what it views as abusive business practices. The order prohibited US investors from buying and selling shares in a list of Chinese companies designated by the Pentagon as having military ties.

China’s government will adopt necessary measures to safeguard the rights and interests of the nation’s companies, foreign ministry spokesperson Hua Chunying told a daily briefing in Beijing on Monday.

“China firmly opposes the US government’s behaviour of politicising trade issues, and abusing its national power and concept of national security to oppress Chinese companies,” Hua said. “This is in serious violation of the principle of market competition and international trade rules.

Bloomberg

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