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Shares of Alibaba and Tencent sank following a report that the Trump administration could block U.S. investment in Chinese tech groups, risking a serious escalation in tensions between Washington and Beijing.
Hong Kong-listed shares of Chinese companies both fell around 4% on Thursday after the Wall Street Journal reported that authorities were considering taking action against China’s largest listed companies in the United States. Hong Kong’s Hang Seng Index slipped 0.5%.
Such a move would be part of a blacklist of companies already announced in November last year by executive order, which blocked investments in 31 Chinese companies Washington suspected of having links with the Chinese military.
Shares of Alibaba and Tencent also fell on Wednesday in New York, where the companies have a combined market capitalization of more than $ 1.3 billion. Alibaba’s US listing in 2014 was the highest in history at the time.
An extension of the existing executive order to include Alibaba and Tencent risks a dramatic escalation of tensions between the world’s two largest economies, which have worsened significantly over the past year.
If the Pentagon adds tech groups to its list of companies with suspected military ties to China, US President Donald Trump’s executive order would prevent US investors from trading their shares from January 11. Existing shareholders would have until November to vacate their holdings.
Ke Yan, analyst at DZT Research, said it was difficult to quantify what the impact would be if Mr. Trump went ahead with the ban. “More details are needed to assess the impact, such as the definition of US investors and the trading venue of the listed entity subject to the ban, and more importantly the reasons for such a ban,” said he declared.
The executive order, which was Mr. Trump’s first major policy response after losing the 2020 presidential election to Joe Biden, has already had an impact on Chinese companies listed in the United States.
On Wednesday, the New York Stock Exchange confirmed that it would pull three state-run Chinese telecommunications companies: China Mobile, China Telecom and China Unicom next week.
The NYSE originally announced plans to take the companies off the list on Dec.31, but reversed the course on Monday before reverting to its previous plan later this week.
Earlier this week, Mr. Trump decided to ban transactions with Chinese payment apps, including Alipay and WeChat Pay, which are affiliated with Alibaba and Tencent, respectively.
In late December, the United States also announced that subsidiaries of Chinese companies would also be included in the ban.
The same month, the Trump administration also added Semiconductor Manufacturing International Corp, China’s largest chipmaker, and drone company DJI to an export blacklist.
Alibaba faces its own challenges in China, where it faces an antitrust investigation, and as regulators consider the future of its sister company Ant Group after the cancellation of its scheduled $ 37 billion IPO in November.
Jack Ma, the founder of Alibaba and Ant, has not been seen in public since late October as regulators surrounded his businesses.
Alibaba and Tencent declined to comment.
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