Major US investment index to drop 10 Chinese stocks blacklisted by Trump

American index provider MSCI has followed other global peers in the removal of securities of Chinese firms that have been blacklisted by the outgoing Trump administration.

In a statement, MSCI said that it will delete ten Chinese companies from its Global Investable Market Indexes (GIMI), as well as from related non-market capitalization weighted indexes and from relevant custom indexes. The move, that targets China’s top chipmaker SMIC, as well as China Communications Construction and Hangzhou Hikvision among others, is set to come into force “as of the close of business on January 5, 2021.”

The stock index said that it decided to move ahead with the decision after extensive consultations with market participants. According to MSCI, investors believed that the US’ blacklisting could effectively “challenge the investability” and limit opportunities to transact in the impacted securities.

The list of targeted companies could be further updated and the final decision on deletions will be announced on December 30. However, MSCI vowed to launch new versions of various indexes for emerging markets that will retain the securities of the excluded Chinese companies.

A number of index providers caved in to US government pressure as the Trump administration previously barred Americans from buying shares and investing in a wide range of Chinese firms. The US claims those businesses have ties to the Chinese military and pose a threat to the country’s national security, even though some of the blacklisted firms are associated with infrastructure and construction.

Shortly after the ban was announced, British provider FTSE Russell said it would remove shares of eight Chinese companies named by the US government from some of its indexes. Similar moves were made by the S&P Dow Jones Indices and the Nasdaq earlier this month. 

Beijing has repeatedly criticized US pressure on its businesses and vowed to protect their interests. It recently brushed off concerns that Washington’s aggressive policies would impact investment in Chinese companies. According to Chinese Foreign Ministry spokesperson Wang Wenbin, international players will find “various other methods” to invest in those firms.

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