China ADRs sink after report U.S. eyeing Alibaba, Tencent bans
Jan 10 2021
Alibaba ADRs and Tencent ADRs see daily trading volume on average of 18.6 million and 3.8 million, respectively, far outstripping the volume of trades in the USA for the three telecom stocks.
State and Defense Department officials in recent weeks have discussed expanding a blacklist of companies prohibited to US investments over alleged ties to China's military and security services, according to people familiar with the matter.
Trump has unleashed a raft of tough measures against Chinese firms in his waning days in the White House as he seeks to cement his hardline legacy and as Beijing and Washington have clashed over the coronavirus and the Chinese crackdown on Hong Kong. He also said that the system stifled business innovation and compared China's global banking regulations to an "old people's club".
Most observers polled by the Harvard Business Review think the Biden administration will roll back some of Trump's restrictions on Chinese tech firms and pursue a less combative trade policy. While the world's second-largest economy was the first to rebound from Covid-19, its recovery is showing signs of peaking even as global growth remains sluggish and ties with the us stay fraught.
China's two largest companies - Tencent and Alibaba - both saw their Hong Kong stocks close 4.7% and 3.9% lower respectively on Thursday (07 January 2021), after the U.S. government was said to be weighing the possibility of adding both companies to its blacklist of Chinese companies.
China will take action to protect its companies' legitimate rights and interests, says Ms. Hua.
If the ban is finalised, then U.S. investors will be prohibited from trading the securities of both companies starting from 11 January 2021.
Alibaba and Tencent did not immediately respond to Reuters requests for comment.
Through investments, however, Tencent has familiarized itself with the foreign financial markets. But valued at more than $600 billion, it is still among the biggest 10 companies globally.
The closely-watched iShares China Large-Cap ETF fell 1.2 per cent while the NASDAQ Golden Dragon China Index, which tracks other large Chinese technology stocks, dropped 2.1 per cent for its worst day since November.
The November chief request looked to offer teeth to a 1999 law that requested that the Defense Department draft a rundown of Chinese organizations considered to be controlled or owned by the Chinese military. His executive order banning Alipay, WeChat and others from any transactions in the US will only be effective 43 days from now, well into Biden's first 90 days. Ltd.'s Alipay and Tencent's digital wallets. Also on Wednesday, the New York Stock Exchange said it would delist three major Chinese telecommunication carriers targeted by a Trump executive order, after earlier scrapping the plan following "new specific guidance" from the Treasury Department.
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.
The order bans trading in the affected securities starting January 11.
INVESTMENT BANS * On Nov. 12, Trump signed an executive order barring USA investors from buying exposure to firms deemed linked to the Chinese military after November 2021.
Asset managers are lobbying to prevent companies like Alibaba from becoming blacklisted, said a person familiar with large financial firms' conversations with USA regulators.
In China, Tencent has always been competing with Ant Group, the Alibaba fintech affiliate, to court users in payments, lending, wealth management and even insurance.
Reports speculating on Alibaba founder Jack Ma's whereabouts were appeased after CNBC anchor finance journalist David Farber reported on Tuesday (Jan 5) that the Chinese billionaire was not missing, as confirmed by a person familiar with the matter.
Since Ma's speech, Chinese regulators have begun an antitrust probe into Alibaba and ordered fintech Ant to change its lending and other consumer finance businesses, including the creation of a holding company to meet capital requirements.
Closer scrutiny of mergers and acquisitions could add uncertainty over the growth of large internet firms.