Ban on China firms may affect $60B of bonds

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    LONDON- US curbs on investors owning securities from a number of Chinese companies could affect as much as $60 billion worth of bonds and spark hefty outflows through forced selling, JPMorgan wrote in a note to clients.

    Donald Trump’s White House issued an executive order in November banning Americans from investing in companies the US Defense Department says have ties to China’s military – an assertion many of the firms deny and that China’s government says lacks evidence.

    While a number of the 44 firms listed on the Defense Department list have been cut from various equity indexes or seen their securities delisted from the New York Stock Exchange, fixed income markets are still grappling with the impact as many bonds are issued through subsidiaries rather than main companies.

    In a note to clients written earlier in the week and ahead of the publication of a full list of subsidiaries that are owned 50 percent or more by Communist Chinese military companies, JPMorgan estimated that around “US$55-60 billion of bonds would be affected if/when the Treasury acts.”

    Democratic President Joe Biden, who took office on Wednesday, has not spelled out any plans for his predecessor Donald Trump’s executive order forcing the divestment but could easily revoke it.