Xiaomi shares drop greater than 12% from being added to the US blacklist

© Reuters.

From Gina Lee – Chinese smartphone manufacturer Xiaomi (OTC 🙂 Corporation fell after US President Donald Trump's administration blacklisted it from Chinese military-affiliated companies.

Xiaomi Corp (HK 🙂 fell 12.40% to HK $ 28.60 ($ 3.69) by 00:21 ET (5:21 GMT).

The company was one of nine companies blacklisted by the Department of Defense to increase pressure on China before President-elect Joe Biden took office. The state-owned aircraft manufacturer Commercial Aircraft Corp. from China Ltd. or Comac, Luokong Technology Corp., Gowin Semiconductor Corp., Global Tone Communication Technology Co. and Advanced Micro-Fabrication Equipment Inc. were also among the nine to make it onto the market list.

Under an executive order signed by Trump in November 2020, US investors must liquidate shares in a company on the DoD's list by November 11, 2021.

"The public has been extensively warned of the essential risks associated with investing," said Keith Krach, undersecretary of state for economic growth, energy and the environment at the US State Department on Thursday.

A statement from Xiaomi said it is not owned or controlled by the Chinese military and that it would take appropriate steps to protect its interests. However, the company is facing deletion from US stock exchanges and deletion from global benchmarks unless it is blacklisted.

China Mobile (NYSE 🙂 Ltd., China Telecom (NYSE 🙂 Corp. and China Unicom (NYSE 🙂 Hong Kong Ltd. were removed by MSCI Inc. last week due to their listing.

The Beijing-based company Xiaomi, co-founded by billionaire Lei Jun, is one of the best-known brands in China. Regarded as China's answer to Apple Inc (NASDAQ :), it also makes electric scooters, headphones, and smart rice cookers in addition to its flagship smartphone. The company competes with Huawei Technologies Co. for the title of leading mobile device brand in China and has stolen market share from Huawei as US sanctions against Huawei tightened.

Meanwhile, the Ministry of Commerce has established the China National Offshore Oil Corp. Blacklisted (CNOOC (NYSE :)), the country's top deepwater explorer, on its own. The move follows the decision to blacklist more than 60 other Chinese companies in December 2020.

The reason for listing CNOOC is because of its operations in the South China Sea. China's claim to drilling rights in the region has affected relations with other claims to the waters, including Vietnam and the Philippines.

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