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S&P Dow Jones to remove 21 Chinese firms from indices after US blacklisting

S&P DJI said it would remove A-shares, H-shares and ADRs of 10 companies including Hikvision and Semiconductor Manufacturing International Corp from all equity indices prior to the market open on December 21

twitter-logoReuters | December 10, 2020 | Updated 14:46 IST
S&P Dow Jones to remove 21 Chinese firms from indices after US blacklisting
S&P DJI said said it will also remove 11 securities issued by Chinese companies from its fixed income indices before January 1

S&P Dow Jones Indices said on Thursday it would remove Chinese companies including Hikvision from its products, becoming the latest index provider to do so following a Trump administration order restricting purchases of their shares.

S&P DJI said it would remove A-shares, H-shares and ADRs of 10 companies including Hikvision and Semiconductor Manufacturing International Corp from all equity indices prior to the market open on December 21.

The company said it will also remove 11 securities issued by Chinese companies from its fixed income indices before January 1.

Hikvision and SMIC did not immediately respond to a request for comment.

"The order ... may impact the ability of market participants to replicate S&P DJI Equity and Fixed Income indexes containing securities affected by the order," S&P DJI said in a statement.

Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ Kokusai Asset Management in Tokyo, said that funds following the S&P indices "will have to sell. This goes beyond the routine annual changes to names on the index."

"Once the passive funds start selling, the active funds will be inclined to do the same."

S&P DJI's move comes after index provider FTSE Russell said last week that it would remove eight Chinese firms from its products to comply with the US executive order, which barred U.S. investors from buying securities of blacklisted firms starting in November 2021.

The company said it had acted on feedback from index subscribers and other stakeholders.

The executive order, unveiled in November and first reported by Reuters, is designed to deter US investment firms, pension funds and others from buying shares of Chinese companies designated by the Defense Department as backed by the Chinese military.

Hikvision previously said that the U.S. order's decision to pursue it was "groundless".

Hikvision shares in Shenzhen gained more than 4% in early afternoon trade on Thursday after the S&P DJI announcement. SMIC's Shanghai shares rose 1.01% and its H-shares fell 0.45% in Hong Kong.

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