By Alexander Osipovich

The New York Stock Exchange is in the hot seat after a baffling flip-flop in which it first said it would delist three Chinese companies to comply with an executive order from President Trump, only to reverse itself four days later.

The NYSE's U-turn drew criticism from the administration of President Trump, who signed the order in November ordering a ban on the trading of securities of companies U.S. officials say have links to the Chinese military.

The order was one of the last salvos by Mr. Trump to get tough on Beijing and put the NYSE in a difficult situation since the exchange has long welcomed initial public offerings of companies from China.

Treasury Secretary Steven Mnuchin called NYSE President Stacey Cunningham while on a trip to Egypt to object to the exchange operator's reversal, a Trump administration official said. Mr. Mnuchin supports NYSE's original plan to delist the companies, this official added.

News of his call to Ms. Cunningham was earlier reported by Bloomberg News. A spokesman for the NYSE, which is owned by Intercontinental Exchange Inc., declined to comment on the call from Mr. Mnuchin.

The NYSE's moves have also provoked consternation among investors about the ultimate impact on the companies in question, all of which are in telecommunications: China Mobile Ltd., China Telecom Corp. and China Unicom (Hong Kong) Ltd. The three stocks have gone on a wild ride, first tumbling and then rebounding after the NYSE's about-face.

The Big Board said Dec. 31 that it would move to delist the three companies' American depositary receipts to comply with Mr. Trump's order. Then, late Monday, the NYSE said in a notice that it was putting the delisting process on hold, citing "further consultation with relevant regulatory authorities." The Monday notice linked to a guidance document recently issued by the Treasury Department clarifying which firms are affected by the executive order, but the NYSE provided no other explanation.

A person familiar with the matter said Tuesday that the NYSE reversed its decision because of ambiguities in whether the three telecom companies are covered by Mr. Trump's order. If and when there is formal confirmation that the three companies are covered by the order, the NYSE would delist them, this person said.

Lawyers not affiliated with the NYSE said there may have been some confusion about which companies are covered by the order and when the trading ban takes effect.

"Clearly there was some sort of new information or miscommunication that caused them to change direction within a couple of days," said Alan Seem, a partner at law firm Jones Day.

"The last thing the NYSE wants to do is have to delist these Chinese companies," added Mr. Seem, who worked on the initial public offerings of China Mobile, China Telecom and other Chinese companies in a previous job.

Mr. Trump's November order identified 31 "Communist Chinese Military Companies" and banned trading in their shares starting Jan. 11. But it didn't spell out in detail which of the companies' subsidiaries and affiliates might also be covered by the trading ban. That ambiguity prompted a behind-the-scenes fight between various agencies over how broad the ban should be, The Wall Street Journal reported in December.

The Treasury Department released guidance on Dec. 28 saying the ban would apply to subsidiaries that were 50% or more owned by the blacklisted Chinese companies. That would capture the three NYSE-listed telecom firms, which are majority-owned by companies on the blacklist.

But the guidance document also said the ban on subsidiaries would only take effect 60 days after the Treasury Department formally named which subsidiaries are covered by the order. The department hasn't taken that step yet. Potentially, that could spare the three NYSE-listed telecoms companies, since the incoming administration of President-elect Joe Biden could reverse the ban before it takes effect.

The NYSE cited the Dec. 28 guidance when reversing the delisting decision. It is unclear why the exchange moved ahead with its New Year's Eve delisting announcement, even though the Treasury Department hadn't formally named the subsidiaries to be covered by Mr. Trump's order. Stock exchanges are tightly regulated and normally work closely with their oversight agencies in Washington.

Some supporters of Mr. Trump's tough stance on China blasted the NYSE for its about-face.

"Once again Wall Street has chosen the Chinese Communist Party over the economic and national security interests of the United States," Christopher Iacovella, head of the American Securities Association, a brokerage group, said in a statement.

"The American people deserve an explanation for this unthinkable reversal," added Mr. Iacovella, whose group has backed tighter restrictions on Chinese stocks listed on U.S. exchanges.

The NYSE's intent is to comply with Mr. Trump's order, the person familiar with the matter said.

Some investors were feeling whiplash from the NYSE's moves. One individual investor said he had taken a major loss on shares in China Mobile because of the NYSE's original decision to delist the company.

He was holding the shares in hopes that Mr. Biden would ultimately reverse Mr. Trump's order but decided to sell after his brokerage notified him that investors could have trouble liquidating the shares, the investor said. That guidance prompted him to sell the shares at a loss just before the NYSE reversed its decision.

China Mobile's NYSE-listed shares fell 5.9% on Monday before the reversal was announced, then soared 9.3% on Tuesday.

Paul Kiernan contributed to this article.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com

(END) Dow Jones Newswires

01-05-21 1906ET