Strategy Note /

Don't buy but keep close tabs on China's three delisted telcos

  • Political factor plays a significant role in the delisting event

  • Delisting is projected to diminish some liquidity of the three operators’ stocks

  • The possible permission termination is the key risk that the companies and investors should pay attention to

Don't buy but keep close tabs on China's three delisted telcos
19 May 2021
Published byEqualOcean

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The delisting event may become a milestone of terminating permission of the three telecom players' businesses.

The delisting background story

On November 12, 2020, Donald Trump, the former president of the United States, signed an executive order prohibiting American citizens and corporations from investing in companies related to China' military forces. As China's 5G application vanguards, the country's three major telecom players, China Mobile (00941:HK, CHL:NYSE), China Unicom (600050:SH, 00762:HK, CHU:NYSE) and China Telecom (00728:HK, CHA:NYSE), were included on the prohibited list. At the end of 2020, the NYSE announced plans to delist the three operators before January 11, 2021. However, the largest exchange suddenly recalled the plan on January 4, 2021 – and, only two days later, the NYSE suddenly announced it would continue the delisting action.


Digging into the event, we can find that the thing is closely related to the US presidential election of 2020. In recent ten years, the market value of Chinese companies listed in the United States increased by 300%. Meanwhile, Jeffrey Sprecher, chairman of the NYSE, and his wife, Republican Senator Kelly Loeffler, have been attacked by other politicians for doing business with Chinese companies. January 5, 2021 was the day when the count of the vote for the Senate in Georgia ended. We have reason to believe that the previous delisting decision was a way for senator Kelly Loeffler to get more political chips, while the cancellation was a way for the couple to reduce the impact on their businesses once the voting was nearly over. However, senior government officials, including US Treasury Secretary Steven Mnuchin, immediately opposed the cancellation action. Pushed by the government, the delisting plan restarted.

 Crucial delisting impact

The three major operators landed on NYSE around 2000. Back then, they issued ADRs in addition to the common shares circulating in Hong Kong. By the end of 2020, China Mobile's stocks held in the form of ADR accounted for about 2% of the total equity pool, while China Unicom and China Telecom's ADRs accounted for about 1% and 0.6% respectively. 


However, the ADR transaction volume of the three operators is relatively high when compared with the equity proportion...

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