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U.S. Weighs Adding Alibaba, Tencent to China Stock Ban

The move could shake up global financial markets.
(Ascannio)
(Ascannio)
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“U.S. officials are considering prohibiting Americans from investing in Alibaba Group Holding Ltd. and Tencent Holdings Ltd., a potential escalation of the Trump administration’s efforts to unwind U.S. investors’ holdings in major Chinese companies,” WSJ writes.

Why It Matters: Government officials have held discussions in recent weeks on expanding a blacklist of companies over alleged ties to China’s military and security services. After years of policy aimed at closer ties, the U.S. has taken a firmer stance against China. Blacklisting Alibaba and Tencent, China’s two most valuable publicly-traded companies, could not only deal a blow to China but have wide-ranging capital markets ramifications.

Just To Recap: The U.S. government announced its original, 31-company blacklist back in November. President Trump has also targeted other means to restrict investing in Chinese firms, such as the NYSE delisting three major telecom carriers targeted by an executive order.

  • Trump also signed an order prohibiting U.S. individuals and companies from interacting with eight Chinese software apps to take effect in 45 days.

As Trump prepares to leave office, U.S. authorities “have clashed over the scope of the list of companies barred to American investors.” Pentagon and state officials have taken a broader approach to the list, including maybe big firms and subsidiaries, to “curb China’s military and security services’ access to data troves, advanced technologies and expertise.”

  • The Treasury wants a narrower list, as forced selling could shake financial markets.
  • Asset managers are lobbying against the restriction of companies like Alibaba.

To Be Clear: The Chinese government doesn’t control Alibaba and Tencent, but U.S. Authorities have “long voiced concerns that the companies could be coerced to share data on U.S. citizens and businesses, potentially serving as a conduit for Beijing to extend its influence.”

Looking Ahead: The plan remains under discussion right now, and given the potential fallout, it may not proceed.

Justin Oh:

We have made some moves on the ROIC Big Board in response to all of this drama, so check that out. It’s very hard for a Westerner to truly understand what’s going on over there and how it will affect Chinese stocks going forward.

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