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Chinese companies will not be removed from the New York Stock Exchange index

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The New York Stock Exchange (NYSE) said it would no longer delist three of China’s biggest telecommunications companies to comply with a November 2020 executive order by outgoing US President Donald Trump, in a surprise policy U-turn before the first delisting takes effect.

Shares of the three companies – China Telecom, China Mobile and China Unicom (Hong Kong) – soared in Hong Kong after the NYSE’s announcement.

The NYSE had announced the delisting plan on New Year’s Day, in an unprecedented step to remove the American Depositary Shares (ADS) of the three Chinese companies to comply with Trump’s order that bars American investors from trading in companies with ties to China’s military. All three companies are state-owned entities managed by government-appointed managers.

The NYSE reversed its delisting decision after “further consultation” with regulatory authorities, according to a market notice on Tuesday, without elaborating. The NYSE did not respond to a request for comment after US office hours.

Unicom’s shares jumped 8.5 per cent to a seven-week high of HK$4.85, while China Telecom advanced by 3.4 per cent to HK$2.16. Shares of China Mobile, the operator of the world’s largest cellular phone network, rose 5.1 per cent to HK$46.10 after making their biggest intraday gain in nearly 10 months.

“I always thought this decision bizarre to start with,” said Jefferies’ head of telecoms research Edison Lee, pointing out that the New York-listed shares of CNOOC, a unit of state-owned China National Offshore Oil Corporation, were not designated for delisting. “It was not a consistent decision.”

The three Chinese telecoms companies listed their ADSs in New York following their initial public offerings in Hong Kong, giving US-based and European investors access to trade their equities during US market hours.

The ADSs are fungible with their H-share in Hong Kong, which means they can be exchanged for their counterparts. Each China Telecom ADS is equal to 100 shares in Hong Kong, while Unicom’s ratio is 1 for 10, and China Mobile’s ratio is 1 for 5.

The three ADSs are thinly traded on the NYSE, with the heaviest-traded China Telecom ADSs comprising no more than 12 per cent of the number of H-shares that changed hands everyday in Hong Kong in 2020. For China Mobile, the ratio was a mere 6.9 per cent, according to Bloomberg’s data.
Still, the three companies said on Monday that they would take steps to protect their “lawful rights”.

“The company will promptly conduct an investigation and analysis and strengthen its communication and liaison with the regulatory authorities of its listing venues, with a view to protecting the lawful rights of itself and holders of the company’s securities,” China Mobile said in an exchange filing.

“The role of the US as the global financial centre is dependent on the trust by global companies and investors in the inclusiveness and credibility of its rules,” the Chinese foreign ministry’s spokeswoman Hua Chunying said during a regular Tuesday press briefing in Beijing, reiterating that the plan to delist the Chinese companies “have seriously breached the much-touted principles of market economy and fair competition , as well as international economic and trade rules.”

China Unicom and China Telecom said separately on Tuesday that they remain listed on the NYSE, but NYSE Regulation would continue to evaluate the applicability of the executive order to the companies and their “continued listing status”.

“The company will continue to closely monitor the development of this matter and will publish further announcement as and when appropriate,” China Telecom said in a stock exchange filing. “In the meantime, investors are advised to exercise caution in dealing in the securities of the company.”

Trump signed an executive order on November 12 that barred American investors from owning or trading shares of 35 companies that the US claims are owned or controlled by the Chinese military.

On December 28, the Trump administration provided further clarification that the order applied to all “US persons” ranging from individuals to pensions funds and would block investors from owning exchange-traded funds (ETFs) and index funds that included the 35 companies and any of their 50 per cent-owned units and subsidiaries. US persons have until November 2021 to divest their holdings.

The NYSE’s reversal came just after FTSE Russell announced it would remove Unicom, Panda Electronics Group and Semiconductor Manufacturing International Corporation (SMIC) from its global stock benchmarks to comply with the December guidance. The stocks would be removed from the FTSE Global Equity Index Series (GEIS), the FTSE China A Inclusion indices and associated indices beginning on Thursday, the index compiler said.

“FTSE Russell will continue to monitor for any further updates from the [US] Department of Defense (DOD) and the Office of Foreign Assets Control (OFAC),” the company said. “Any additional names published by the DOD and OFAC as being subject to sanctions will be evaluated after 11 January 2021.”

The uncertainty over how US policies will affect US-listed Chinese firms could benefit Hong Kong Exchanges & Clearing (HKEX), the operator of the city’s stock exchange.

In the past two years, the Hong Kong bourse has attracted secondary listings from several high-profile US-listed Chinese companies, such as this newspaper’s owner Alibaba Group Holding, NetEase and JD.com, as tensions rose between the world’s two biggest economies.

HKEX recently surpassed CME Group to become the most valuable stock exchange operator in the world, now valued at about US$75 billion. The company’s shares rose 15 per cent since the end of November.

The company’s recent share rise has been driven in part by further escalation in US-China tensions, including the potential for US delistings of Chinese firms, according to Citigroup analyst Tian Yafei.

Delistings of Chinese companies, such as those previously announced by the NYSE, are likely to “reinforce HKEX’s status as the key listing venue for companies,” Tian said in a note on Monday. “Chinese could also accelerate secondary listings” in Hong Kong, the bank added.

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The Indian pharmaceutical company will be fined US $ 50 million

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Washington: An Indian drug manufacturer has agreed to plead guilty to concealing and destroying records prior to a 2013 US Food and Drug Administration’s inspection of its plant and pay USD 50 million in fines and forfeiture, the Department of Justice has announced.

In a criminal information filed in federal court in the District of Nevada and unsealed on Tuesday, Fresenius Kabi Oncology Limited (FKOL) was charged with violating the Federal Food, Drug and Cosmetic Act by failing to provide certain records to Food and Drug Administration’s (FDA) investigators.

As part of a criminal resolution, FKOL agreed to plead guilty to the misdemeanour offense, pay a criminal fine of USD 30 million, and forfeit an additional USD 20 million. FKOL also agreed to implement a compliance and ethics programme designed to prevent, detect, and correct violations of US law relating to FKOL’s manufacture of cancer drugs intended for terminally ill patients, a media release said.

“By hiding and deleting manufacturing records, FKOL sought to obstruct the FDA’s regulatory authority and prevent the FDA from doing its job of ensuring the purity and potency of drugs intended for US consumers,” said Acting Assistant Attorney General Brian Boynton of the Justice Department’s Civil Division.

“FKOL’s conduct put vulnerable patients at risk. The Department of Justice will continue to work with FDA to prosecute drug manufacturers who obstruct these inspections,” the statement said.

“Pharmaceutical companies that obstruct FDA inspections jeopardise patient safety,” said US Attorney Nicholas A. Trutanich for the District of Nevada.

According to court documents, FKOL owned and operated a manufacturing plant in Kalyani, West Bengal, that manufactured active pharmaceutical ingredients (APIs) used in various cancer drug products distributed to the United States.

The government alleges that prior to a January 2013 FDA inspection of the Kalyani facility, FKOL plant management directed employees to remove certain records from the premises and delete other records from computers that would have revealed FKOL was manufacturing drug ingredients in contravention of FDA requirements.

Kalyani plant employees removed computers, hardcopy documents, and other materials from the premises and deleted spreadsheets that contained evidence of the plant’s violative practices, the Department of Justice alleged.

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Coca-Cola and Pepsi have been fined Rs 72 crore by the Pollution Control Board

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Beverage manufacturers Coca-Cola and PepsiCo and bottled water manufacturer Bisleri have been fined by the Central Pollution Control Board (CPCB) for not filing statutory returns to government bodies with regards to collection and disposal of plastic waste.

The orders issued by the CPCB on February 3 directed Bisleri to pay a fine of Rs 10.75 crore, Hindustan Coca-Cola to pay Rs 50.66 crore and Pepsico India Holdings, Rs 8.7 crore. The companies have been given 15 days to pay the fine and fulfil the requirements that were violated. Failing this, the orders stated that the CPCB will “levy Environmental compensation without giving any further notice.”

Extended Producer Responsibility (EPR) is a system where producers have to take responsibility for managing the disposal of waste and other products after they are no longer of use to consumers. According to the issued orders, the EPR action plan submitted by Coca-Cola stated that the total waste generated through them during August 2019 and September 2020 was 1,05,744 tonnes; but they collected and disposed of only about 23,442 tonnes.

Bisleri, on the other hand, had not provided any information regarding the collection and disposal of waste during the submission of its Quarterly Performance Report (QPR). The company was fined for not disposing of 21,500 tonnes of plastic waste, while Pepsico was held responsible for 11,914 tonnes of waste.

In a statement, a Bisleri spokesperson said that it “is a compliant organisation and adheres to the provisions of PWM Rules, directions and orders passed thereunder from time to time. We have timely submitted all the requisite documents as and when advised by CPCB. As a dedicated and socially responsible corporate, we have adhered to all the guidelines issued by the government. We have been creating awareness about plastic segregation and recycling of plastic. We have been educating citizens through corporates, schools and RWAs. The idea behind the initiative is to “Be The Change You Want To See” by disposing and recycling plastic responsibly.”

“Both SDMC (South Delhi Municipal Corporation) and EDMC (East Delhi Municipal Corporation) in Delhi are aware and have been most supportive of our program. SDMC and EDMC both have been collaborating with Bisleri’s ‘Bottles for Change’ initiative to spread an awareness about clean plastic segregation. We are currently working closely with the regulators to share detailed information relating to our actions on compliance to resolve the issue at the earliest,” the spokesperson added.

Other beverage makers who were penalised for not disposing of plastic waste include Patanjali who was asked to pay Rs 1 crore and NourishCo Beverages (whose products include packaged water brand Himalayan), Rs 89 lakh.

Apart from beverage companies, the Indian Tobacco Company (ITC) has also received an order from the CPCB for “non-compliance of plastic waste management rules” and was fined Rs 5 crore for the violation. The order also directed ITC to formulate an action plan to switch to environmentally friendly alternatives for cigarette packaging within a timeframe of 30 days.

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