S&P DJI restricts 10 Chinese companies from equity indices

After the commencement of the order given by Trump regarding the restriction on purchase of shares of ten Chinese companies, S&P Dow Jones Indices said on Thursday that they would remove A-shares, H-shares and ADRs of those firms, 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.


No comments are made by Hikvision and SMIC as of now.

S&P DJI said in a statement, “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.”

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.” He added.

The index provider FTSE Russell said last week that it would remove eight Chinese firms from its products to comply with the U.S. executive order, S&P DJI proceeded later. Hence, U.S. investors are barred from buying securities of blacklisted firms starting in Nov. 2021.

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

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.

Hikvision has claimed the U.S. order’s decision to pursue as “groundless”, earlier.