The US keeps accusing several Chinese companies of being closely connected with the defense forces of China. They quickly made a list of organizations that international media immediately started calling “military”.
One of the most popular corporations – Xiaomi – is also on the list. Let’s find out what’s happened and what the company should expect.
According to Bloomberg, on January 15th, Xiaomi Corporation, alongside 8 more Chinese companies, got on the Pentagon’s blacklist. The government claims that the enumerated companies are a threat to national security.
More details about the blacklist
- On November 12th, 2020, the US president signed an enactment banning US legal entities and physical persons from making any operations with the stocks of Chinese companies that belong to or work with the Chinese military forces.
- The list of such companies is created by the Ministry of Defense.
- There are already 35 companies on the list.
- US citizens must sell the stocks of the companies from the list until November 11th, 2021.
- US exchanges must de-list these companies and exclude them from their indices.
How did the market react?
On January 15th, as the reaction to Xiaomi being on the list of “military” companies, the stock price of the company fell by 10.26%. In Hing Kong Stock Exchange, the stock price dropped from 32.65 to 29.3 HKD.
The falling on the US OTC market was less noticeable: Xiaomi’s deposit receipts fell by 7.5%, reaching 19.75 USD per paper.
Note that these events touched upon not only Xiaomi’s quotations. The stocks of tech companies that provide Xiaomi with various components and nodes, also dropped.
The stock price of FIH Mobile Ltd fell by 13.51% to 1.3 HKD, Largan Precision Co., Ltd – by 3.38% to 2,860 TWD, AAC Technologies Holdings, Inc. - by 2.68% to 43.55 HKD.
2020 was quite a successful year for the corporation: that year, its stocks grew by 167%, while its capitalization reached 107 billion USD. According to CNBC, in the third quarter of 2020, the company became number three on the list of the world’s largest smartphone manufacturers.
However, this year started with quite negative news: Xiaomi got on the US blacklist, dragging its stocks down by 10%. The company’s representatives deny any cooperation with Chinese military forces and claim their readiness to protect corporate interests.
The November enactment can be considered the last of Trump’s attempts to strike a blow on the Chinese economy, especially its technological sector. Analysts say that Joe Biden will not hurry to revoke the decree because his priority is domestic challenges.
As for the popular Chinese corporation, investors worry that the situation will significantly influence the purchase amount of smartphone components, as well as sales. Follow this situation with us to know if analysts are right.