Trump threatens to delist Chinese shares – quartz

While President Trump is staring down an inquiry, his administration appears to have been trying to divert attention by using China as something of a red herring.

US stock market indices fell today after Bloomberg reported that the Trump administration was considering delisting Chinese companies. The Dow Jones Industrial Average dipped about 0.3% while the S&P 500 sank about 0.5%. Chinese companies, however, fell further. E-commerce giants Alibaba and went over 5-6%, while Chinese conglomerate Tencent slipped 3%.

Although Trump has increasingly escalated the trade war through tariffs, his administration's alleged threat to remove Chinese companies from US stock markets represents a new ̵[ads1]1; and extreme – direction.

"In today's world, there is a lot of capital chasing limited investment opportunities around the world," Minyuan Zhao, associate professor of strategy at Washington University in St. Louis, told Quartz via email. "Cutting American institutions from such opportunities [would] does not help the United States."

"The & # 39; Chinese companies & # 39; listed in the US are usually & # 39; hybrid companies & # 39; with foreign investment right from the beginning, & # 39; observed Zhao.

Take for example Alibaba "The five largest shareholders are Blackrock (USA), T. Rowe Price (USA), and Baillie Gifford & Company (Scotland), along with the two co-founders," she wrote. "In previous years, Softbank (Japan) and Yahoo ( United States) [ed] nearly half of Alibaba's equity. "

Given that U.S. investors own a significant portion of Chinese companies, Zhao wondered how the administration would decide whether a company is" Chinese enough. "Instead of achieving a foreign policy targets, blocking US investors from Chinese companies can artificially depress stock prices and actually penalize American investors more than anyone else.

"The US financial market is attractive to businesses around the world. the world because of its sophisticated institutions, and people's trust in them. Any arbitrary restrictions by the administration will weaken, if not destroy, such confidence, "Zhao argued.

Despite the potential for self-harm, however, President Trump may very well abolish Chinese companies. Gary Hufbauer, a senior at the Peterson Institute for International Economics, told Quartz that there is a 30-40% chance of it happening.

Under the 1977 International Emergency Economic Powers Act, the Trump administration "has the power to tell pension funds [and others] not to buy Chinese stocks and tell exchanges not to to list Chinese companies or to delist existing companies, "Hufbauer said in a telephone interview. "The power is there," he said, but "political and market boundaries would be serious, as we have seen today."

"If he did, it would be a matter of setting a precedent for other countries he didn't like," Hufbauer said. He expressed mild concern that Trump might similarly play hardball with Europe and Airbus. [19659002] At a macroeconomic level, Hufbauer said, by banning investment in Chinese companies, Trump could inadvertently strengthen the dollar and cause interest rates to fall further. If forced out of China, investors could park their funds in US Treasuries.

To Finally, Hufbauer said, the Trump administration's powers, well, self-serving, appear: "I think he's trying to find something he can to distract from impeachment."

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