MSCI deletes 7 Chinese language firms from some indices and maintains them in others

© Reuters. Illustration photo of the MSCI logo

By Ross Kerber and Alexandra Alper

BOSTON / WASHINGTON (Reuters) – MSCI Inc announced Tuesday that it will remove the stocks of 7 Chinese companies from some global indices after the US imposed restrictions on their purchases, although it would also release new versions of several indices that the same securities.

In a press release, MSCI announced that China Communications Construction Co., Hangzhou Hikvision and CRRC Corp. belong.

The move by MSCI follows the moves of other major index providers to remove stocks from companies associated with the Chinese military by the administration of US President Donald Trump.

In November, the White House issued an executive order banning US investors from buying securities in these companies from late next year.

China has condemned moves to exclude some companies from lists specifying large mutual fund holdings, saying the efforts are against the principles of market competition.

In a statement to Reuters late Tuesday, the White House welcomed MSCI's decision without referring to its terms.

"For years, American investors have unwittingly funded Chinese communist military corporations that help the (People's Liberation Army) threaten US soldiers," said John Ullyot, a White House spokesman for the National Security Council. "This is coming to an end under President Trump's leadership," he said.

MSCI said it acted based on feedback from more than 100 market participants in the US and elsewhere.

While non-US companies may not be subject to Trump's order, MSCI said many were concerned "that the widespread presence of US companies such as commercial banks, broker-dealers and custodians in their chain of financial intermediaries is severely limiting their businesses would be able to deal with the affected securities. "

MSCI announced that it would remove the shares at close of business on January 5th. It said it would not remove any securities from subsidiaries or affiliates of the companies named in the order.

Further updates to checklists issued by US officials could lead to future deletions, MSCI said.

MSCI announced that it will publish new versions of various indices, for example for emerging markets, which will retain the shares in the Chinese companies concerned.

"These indexes and parallel versions of the current custom indexes are available upon request," said MSCI.

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