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Alibaba and Tencent shares drop on US investor blacklist report

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Shares in Alibaba and Tencent sank following a report that the Trump administration could prevent US investment into the Chinese tech groups, risking a severe escalation in tensions between Washington and Beijing.

The Chinese companies’ Hong Kong-listed stocks both fell about 4 per cent on Thursday after the Wall Street Journal reported that officials were considering the measures against China’s largest listed companies in the US. Hong Kong’s Hang Seng index slipped 0.5 per cent.

Such a move would fall under an existing blacklist of companies announced in November last year by executive order, which blocked investments in 31 Chinese companies Washington suspects of having ties to China’s military. 

Both Alibaba and Tencent’s stocks also fell on Wednesday in New York, where the companies have a combined market capitalisation of over $1.3tn. Alibaba’s US listing in 2014 was, at the time, the largest in history.

An expansion of the existing executive order to include Alibaba and Tencent risks a dramatic escalation in tensions between the world’s two biggest economies, which have worsened markedly over the past year.

If the Pentagon does add the tech groups to its list of companies with alleged Chinese military links, the executive order by US president Donald Trump would prevent US investors from trading their stocks from January 11. Existing shareholders would have until November to exit their holdings.

Ke Yan, an analyst at DZT Research, said it was hard to quantify what the impact would be if Mr Trump goes 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,” he said.

The executive order, which was Mr Trump’s first big policy response after losing the 2020 presidential election to Joe Biden, has already had an impact on Chinese companies listed in the US.

On Wednesday, the New York Stock Exchange confirmed that it would delist three state-run Chinese telecommunications companies next week: China Mobile, China Telecom and China Unicom.

The NYSE had originally announced the plans to delist the companies on December 31 but reversed course on Monday before reverting to its previous plan later this week.

Mr Trump earlier this week moved to ban transactions with Chinese payment applications including Alipay and WeChat Pay, which are affiliated with Alibaba and Tencent, respectively.

In late December, the US also announced that subsidiaries of Chinese companies would also be included in the ban.

The Trump administration in the same month also added Semiconductor Manufacturing International Corp, China’s largest chipmaker, and drone company DJI to an export blacklist.

Alibaba faces challenges of its own in China, where it faces an antitrust investigation, and as regulators consider the future of its sister company Ant Group after cancelling its planned $37bn IPO in November.

Jack Ma, the founder of both Alibaba and Ant, has not been seen in public since late October as regulators circle his businesses.

Alibaba and Tencent declined to comment.