U.S. investment indices provider MSCI will be dropping the stock of 10 Chinese companies with suspected links to the People's Liberation Army, following an executive order banning investment in more than 30 mainland firms.
MSCI's announcement Tuesday comes in the wake of similar moves by other American index providers as President Trump raises financial sanctions and barriers against China.
The securities will be removed from the MSCI Global Investable Market Indexes and related indices January 5 in a move praised by the White House.
"For years American investors have unknowingly financed Chinese Communist military companies, which help the PLA threaten US and allied service members," said National Security Council representative John Ullyot Tuesday. "Under President Trump's leadership, this is coming to an end."
The 10 stocks, listed in Hong Kong and Shanghai, include Hikvision Huangzhou, Semiconductor Manufacturing International Corp., China Communications Construction Co, China Spacesat, China Railway Construction, CRRC Corp and Dawning Information Industry.
Hikvision is a supplier of monitoring equipment to detention camps in Xinjiang where at least 1 million Muslim Uighurs are being held against their will, while China Spacesat manufactures satellites and has ties to domestic defense agencies.
MSCI said it acted after polling more than 100 investors inside and outside the U.S., and their poll revealed that the ramifications of Trump's executive order are being strongly felt by American and foreign companies alike.
"Non-U.S. market participants noted that the extensive presence of US entities, such as commercial banks, broker-dealers and custodians, within their chain of financial intermediaries would significantly limit their ability to transact in the impacted securities," the indices compiler said in a statement.
To lessen the impact, MSCI will be launching new indices containing the 10 stocks for investors outside the U.S., while subsidiaries and affiliates of the companies named in the executive order will not be affected.
