Post U.S. Blacklisting, FTSE Russell to drop shares of eight Chinese firms

Index provider FTSE Russell will delete shares of video security firm Hikvision and seven other Chinese companies after a U.S. order restricting trading of firms linked to the Chinese military, it said on Friday.

FTSE Russell said it acted following feedback from index subscribers “and other stakeholders,” and that it was following its policy when sanctions are imposed that restrict investments.

The move shows how a recent bid by the White House to give teeth to a blacklist of Chinese companies allegedly backed by China’s military could crimp U.S. investments in the country, often held in passive products built on broad indexes.

In a statement sent by a spokesman for owner London Stock Exchange Group, FTSE Russell said it would drop shares in companies such as Hangzhou Hikvision, China Railway Construction Corp, and China Spacesat. The deletions from its FTSE Global Equity Index Series and several others would take effect on Dec. 21.

Rival index provider MSCI Inc had previously said its products would “reflect any necessary changes” depending on U.S. law. A spokeswoman did not immediately respond to questions on Friday.

FTSE Russell had previously said it was reviewing securities and said it could drop more companies based on findings by U.S. officials. All eight companies to be dropped by FTSE Russell are on a list of “Communist Chinese Military Companies” compiled by the Pentagon.

The White House last month published an executive order, barring U.S. investors from buying securities of the blacklisted firms starting in November 2021. They include China Communications Construction Co Ltd, China Nuclear Engineering & Construction Corp Ltd, CRRC Corp Ltd, Dawning Information Industry Co Ltd, and China National Chemical Engineering Co Ltd.

Earlier this week the Pentagon added four additional companies to its list of barred firms including China’s top chipmaker SMIC and oil giant CNOOC. The FTSE Russell spokesman, Tim Benedict, said it was aware of those additions and said “we will evaluate those in due course.”

Reacting sharply, a Hikvision spokesman said the decision to pursue this act was “groundless” as the company had never participated in research and development work for military applications.