Impact of the U.S. Ban on Named Chinese Securities

China’s technology, internet and fintech companies have faced renewed regulatory scrutiny. What are the key points for investors?

As in many countries, regulators in China are thinking more about consumer protection, data security and anti-trust issues related to their country’s tech sector. While we do not believe new regulations will result in dramatic changes to the corporate tech landscape in China, we are monitoring developments to help us understand potential impacts on business models and valuations of companies held by our strategies.

While it appears some Chinese entrepreneurs are being singled out for greater attention, we believe the government’s intention is to limit the political activities of those individuals, rather than to interfere in their commercial activities. We do not believe the government’s aim is to break up the larger Chinese internet companies.

Are you able to comply with the recent Executive Order on Communist Chinese Military Companies?

On November 12, 2020, Donald Trump issued Executive Order 13959 (“E.O.”) which was designed to protect U.S. investors from financing Communist Chinese Military Companies (“CCMCs”). The E.O. prohibits United States persons from purchasing: (i) publicly traded securities of any CCMC (there are currently 35 names that are prohibited under the E.O.), (ii) any securities that are derivative of publicly traded securities of any CCMC, and (iii) any securities that are designed to provide investment exposure to publicly traded securities of any CCMC. The E.O. goes into effect on January 11, 2021 (or the relevant date for securities added after November 12, 2020).

Matthews Asia complies with Executive Order 13959 (“E.O.”) and does not hold any of the 35 named securities that are prohibited under the E.O. as well as the three recently added Chinese telecommunications companies. We are monitoring the situation closely to ensure we continue to comply with the E.O.

Does Matthews Asia hold any subsidiaries of the named CCMCs?

As a general practice, because of selective disclosure and other compliance regulations, we are not able to address questions about our current holdings, specifically current exposures and any transactional information regarding whether and when we intend to buy, sell or continue to hold a specific company’s security, other than what is posted on our public website.