JPMorgan - U.S. bank London said it would withdraw Huawei's key 10-day US bonds from some of its most influential investment indices from the end of next month, following the latest ratcheting up of financial sanctions against Chinese technology companies.
This week the U.S. Treasury Department issued a new executive order https: www.federalregister.gov, issued in 2021 06 07 2021 -- 12019 addressing-the- threat-from securities investments of-peoples that bankrupt 59 Chinese companies with alleged ties to defense or surveillance.
The renamed USD-denominated bonds will be excluded from JPMorgan fixed income indices since the issuing companies for these securities are explicitly namenses and in the range of the modified order, JPMorgan said in a note to index users late on Tuesday.
It added that the exclusion would happen on July 30. The Huawei bonds currently have a 9 basis points weight in the widely-tracked CEMBI Broad Diversified index of emerging market companies, 36 bps in the Asia-focused JACI Index and 38 bps in the JACI version for social, environmental and governance purposes.
The global investment bank estimates that the CEMBI and JACI index groups have more than $70 billion in assets in them, which relates to the U.S. investment funds that use this kind of indices as a shopping list for what to buy.
Huawei, which is China's leading telecom equipment manufacturer, was put on a public trade blacklist in May 2019 due to national security concerns first. Huawei has denied it has been a risk repeatedly.
The ban put Huawei's iPhone business under immense pressure. Now Huawei is the world's fourth smartphone maker, once with a 6.1% market share in the first quarter.
Semiconductor Manufacturing International Corp said that New and existing bonds from JPMorgan, were excluded from the indices.
Those of China National Chemical and Sinochem will remain in, meanwhile, after they were not included in the new sanctions list last week.