The Biden administration postponed the effective date of Trump‘s ban on investments in Chinese military companies from Jan. 28 to May 27, Reuters revealed in a Feb. 1 analysis titled “U.S. delays ban on Chinese military firms, leaving U.S. investors at a loss…
The article said the Biden Administration said last Wednesday that most investments in companies with “names similar, but not identical, to those of Chinese Communist Party military companies are permitted until May 27,” pushing back the original Jan. 28 deadline. “
Of the 44 companies currently on the ban list, at least 10 have affiliates that have issued U.S. dollar bonds, including huawei, SMIC, Sinochem and China Aviation Industry Corp.
The news did not specify whether all 44 companies were included in the Biden administration’s “pushing back of the original Jan. 28 deadline.
The Trump Administration issued an order last November barring Americans from investing in companies that the U.S. Department of Defense deemed to have ties to the Chinese military. Many Chinese-owned companies have denied having ties to the military, and Beijing has said the U.S. claims lack merit.
The order was followed by a series of amendments and interpretations that hit Chinese stocks and bonds because it was not easy for investors to figure out which securities might be affected.
Listed stocks were quickly purged from U.S. exchanges and global indices. Bond investors struggled to distinguish securities offered by companies with “slightly different” names, using “acronyms” or “similar names.
Reuters said that while the move provided breathing room, it did not solve the problem. We are now in wait-and-see mode until we have a clear picture of what the new government will do,” Paul Lukaszewski, head of corporate debt in Asia Pacific at Aberdeen Standard Investments, was quoted as saying in the analysis.
JPMorgan Chase estimates that the move (to ban investments in Chinese military companies) to restrict U.S. investors and U.S. citizens could affect nearly $60 billion worth of bonds.
The large number of bonds issued by Chinese companies provides investors with buying opportunities outside of developed country fixed income markets where yields are generally ultra-low.
After Trump’s executive order, these Chinese bonds fell and bid-ask spreads widened, but some of them have since recovered.
Recent Comments