JPMorgan Chase: US investment ban on China affects $60 billion in bonds

According to the China Times Electronic News, JPMorgan Chase pointed out in its latest report provided to clients that the US investment ban on securities of 44 Chinese military-related companies will have a huge impact on the capital market, which may affect $60 billion in bonds and trigger a large amount of funds to flow out through forced selling.

Former U.S. President Trump issued an executive order in November last year banning Americans from investing in any publicly traded securities of Chinese companies designated as having military ties that have direct or indirect operations in the United States.

Based on this directive, MSCI has previously removed 11 Chinese company stocks, including SMIC H shares, China Satellite, Hikvision and Sugon, from the MSCI ACWI and other indexes.

The New York Stock Exchange, S&P Dow Jones Indices and others have also announced the removal of the US ADRs of China's three major telecom operators and the forced delisting process.                       

In a recent report to clients, JPMorgan Chase estimated that if the U.S. Treasury takes action, approximately $55 billion to $60 billion in bonds would be affected.

According to JPMorgan Chase's calculations, China National Chemical Corporation, which has been blacklisted, has suffered $1 billion in forced selling and may see another $1.3 billion of funds flow out from affected investors.

In addition, CNOOC's dollar-denominated bonds have reached US$19.5 billion, and more than US$3.2 billion are held in funds registered in the United States. If this is further expanded to all asset management companies with operations in the United States, the impact may reach US$3.5 billion.