Industry Updates

MSCI opens consultation following Trump ban on Chinese companies

Ban could apply to 89 Chinese companies

Tom Eckett

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MSCI has launched a consultation on how best to navigate US President Donald Trump’s recent move to ban US investors from owning certain Chinese companies.

In an announcement on 20 November, the index provider is seeking feedback from market participants on the impact of Trump’s decision on their investment process.

This includes any practical implications on the use of MSCI’s indices or whether new indices may be required to be launched in order to comply with the ban.

The executive order, which was issued by Trump on 12 November, will apply to 31 Chinese companies that the administration said “enable the development and modernisation” of China’s military and “directly threaten” US national security.

Effective 11 January, investors will have until November 2021 to fully divest from the companies on the list, according to the order, which includes smartphone maker Huawei.

In the announcement, MSCI said: “MSCI seeks feedback from market participants on the impact of the order on their investment processes, including any practical implications on the use of MSCI indices and whether any changes to existing indices or the introduction of new indices may be necessary or helpful to maintain the investability of relevant MSCI indices and assist investors to comply with the order.”

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Over the past few days, the Trump administration has doubled down on its moves against China with reports stating the number of companies on the banning list is set to rise to 89.

It is not yet clear how MSCI will approach this issue. China Mobile, which is on Trump’s list, is included in the MSCI EM Asia index, for example.

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