The shares of Alibaba and Tencent sank after a report that the Trump administration could prevent U.S. investment in Chinese technology groups, risking a severe escalation in tensions between Washington and Beijing.
The shares of Chinese companies listed in Hong Kong fell about 4% on Thursday after the Wall Street Journal reported that authorities were considering measures against China’s largest listed companies in the U.S. Hong Kong’s Hang Seng index fell 0.5%.
Such a move would fall on an existing blacklist of companies announced in November last year by executive order, which blocked investments in 31 Chinese companies that Washington suspects have links to China’s military.
Shares in Alibaba and Tencent also fell on Wednesday in New York, where the companies have a combined market capitalization of more than $ 1.3 trillion. Alibaba’s listing in the United States in 2014 was, at the time, the longest 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 largest economies, which have worsened sharply in the past year.
If the Pentagon adds technology groups to its list of companies with alleged Chinese military ties, U.S. President Donald Trump’s executive order would prevent U.S. investors from trading their shares from Jan. 11. Existing shareholders would have until November to exit their holdings.
Ke Yan, an analyst at DZT Research, said it is difficult to quantify what the impact would be if Trump continued with the ban. “More details are needed to assess the impact, such as the definition of US investors and the trading location of the listed entity subject to the ban and, more importantly, the reasons for such a ban,” he said.
The executive order, which was Trump’s first major political response after losing the 2020 presidential election to Joe Biden, has already had an impact on U.S.-listed Chinese companies.
On Wednesday, the New York Stock Exchange confirmed that it would remove three state-owned Chinese telecommunications companies from the list next week: China Mobile, China Telecom and China Unicom.
The NYSE had originally announced plans to remove companies from the list on December 31, but reversed the course on Monday before returning to the previous plan later this week.
Earlier this week, Trump moved to ban transactions with Chinese payment apps, 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 chip maker, and drone company DJI to an export blacklist.
Alibaba faces its own challenges in China, where it faces an antitrust investigation, and while regulators are considering the future of its sister company Ant Group, after canceling its planned $ 37 billion IPO in November.
Jack Ma, the founder of Alibaba and Ant, has not been seen in public since late October, while regulators circulate their businesses.
Alibaba and Tencent declined to comment.