By Chong Koh Ping

Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley moved to delist hundreds of derivatives traded in Hong Kong, following a U.S. government ban on American investment in companies considered to be helping China's military.

Many of the 484 so-called structured products were linked to China's three largest telecommunications operators, China Mobile Ltd., China Telecom Corp. and China Unicom (Hong Kong) Ltd. Many others were tied to the city's benchmark Hang Seng Index and its sister Hang Seng China Enterprises index, both of which include China Mobile and China Unicom.

The three investment banks said in separate filings to the Hong Kong stock exchange late Sunday that the instruments, known as warrants and callable bull/bear contracts, will be suspended from trading on Jan. 25. From Tuesday to Jan. 22, investors will be able to sell the products back to the banks but won't be able to buy them.

The Treasury Department clarified in guidance last week that the three Chinese telecom companies' listed subsidiaries in both Hong Kong and New York are covered by an executive order signed by President Trump in November.

The order aims to stop U.S. investors' money from supporting Beijing's efforts to modernize its military. There are 35 companies on the list, including China's biggest chip maker, as well as energy, aviation, transportation and technology companies.

Hong Kong Exchanges and Clearing Ltd., the stock exchange's parent company, said Sunday that it was working closely with the banks to ensure orderly delistings. "We do not believe the delistings will have a material adverse impact on Hong Kong's structured products market," it said. "We are confident that there will be sufficient investment choices to meet market demand."

HKEX said the city's structured-products market was the world's largest, with over 12,000 listed products issued by 15 banks and brokers. Average daily turnover stood at the equivalent of $1.78 billion, in December.

Warrants and callable bull/bear contracts have become popular in Hong Kong as ways to make leveraged bets on moves in shares, indexes and other asset prices. For example, investors bullish on a particular stock could buy warrants tied to that security. For the lifetime of the warrant, they would then effectively have the right, but not the obligation, to buy those shares at a fixed price.

Separately on Monday, one of the city's highest-profile funds said it wouldn't make any new investments in blacklisted securities. The $13.5 billion Tracker Fund, which is managed by State Street Global Advisors Asia Ltd., tracks the Hang Seng Index, and China Mobile makes up 2.3% of its portfolio.

The Tracker Fund launched in 1999, to help the Hong Kong government unload shares it had bought the previous year to support the market during the Asian financial crisis, and marked the start of the exchange-traded fund industry in Hong Kong.

The U.S. blacklisting has led to the delisting of three Chinese telecom carriers from the New York Stock Exchange and their removal from indexes compiled by MSCI Inc., S&P Dow Jones Indices and FTSE Russell. The uncertainty around the companies' status prompted swings in their stock prices. On Monday, the shares rose between 1.5% and 5.8% in Hong Kong.

Write to Chong Koh Ping at chong.kohping@wsj.com

(END) Dow Jones Newswires

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