(Yicai Global) Jan. 4 -- The New York Stock Exchange’s commencement of the process of delisting China’s three major telecom companies caused their stock to open lower today.

In the afternoon, China Unicom’s [SHA:600050] domestically-traded A-shares had slid 2.91 percent to CNY4.33 (66 US cents), China Mobile stock [HKG:0941] was up 0.23 percent at HKD44.20 (USD5.70) after falling 2.91 percent at the starting gate. China Unicom Hong Kong [HKG:0762] also rebounded to trade 0.67 percent up at HKD4.48 (56 US cents) after falling 2.33 percent at the open and China Telecom [HKG:0728] was down 2.33 percent at HKD2.11.

US President Donald Trump issued an executive order on Nov. 12 barring US investments in Chinese military companies. The decree, which prohibits “US persons” from dealing in publicly traded securities of the three Chinese carriers and their related companies, or any investment products derived from such securities, takes effect on Jan. 11 at 9.30 a.m. Eastern Standard Time. 

All three companies issued separate announcements today stating that they have not received any notice from the New York Stock Exchange of the delisting of their American Depositary Receipts, and have proposed ADR conversion solutions, among which one ADR share of China Unicom could be converted into 10 shares of China Unicom Hong Kong, one ADR share of China Mobile to five of its Hong Kong shares, and one ADR share of China Telecom to 100 of its H-shares.

The NYSE's decision will affect the trading price and volume of the three companies’ Hong Kong and US-traded shares, the firms said, adding they will closely attend to the progress of the matter and are mulling appropriate steps to protect their shareholders’ rights and interest.

Offshore Shares

China Unicom is an A-share listed company whose subsidiary trades on the Stock Exchange of Hong Kong as a red chip company and on the NYSE as an American depository share. China Telecom and China Mobile are not listed on China’s A-share market, but are on the New York and Hong Kong bourses.

Ordinary shares represented by China Unicom's ADRs account for 1 percent of the total of outstanding ones of China Unicom Hong Kong. The average daily trading volume of China Unicom's ADRs were about 9 percent of the total average of its H shares and ADRs last year.

The issued ADRs of China Telecom are 0.57 percent of the company's total shares, and the Hong Kong shares make up 3.32 percent of its total outstanding shares. The company’s average daily trading volume of ADRs last year was about 11 percent of the total average daily trading volume of its H shares and ADRs.

The ordinary shares represented by China Mobile's ADRs comprise 2 percent of the company's total shares and 8 percent of ordinary stocks, excluding those held by controlling shareholders. The company's average daily trading volume of ADRs last year was 22 percent of the total average daily trading volume of its H shares and ADRs.

Military Connections

“US persons” per the presidential edict means US citizens, permanent resident aliens, entities organized under the law of the US or any jurisdiction within the US, or any person within the country. The US earlier entered two sets of 20 and 11 Chinese companies on the list of Chinese military companies on June 12 and Aug. 28, respectively.

The NYSE announced on Dec. 31 that it will start the process of delisting China Mobile, China Telecom and China Unicom, and suspend trading of their ADRs at 4.00 a.m. on Jan. 7, based on this new executive order.

Editor: Ben Armour, Xiao Yi