US officials deliberated, but ended up deciding not to ban US investment in Alibaba Group Holding Ltd. and Tencent Holdings Ltd., said a person familiar with the discussions, removing a cloud of uncertainty over Asia’s two largest corporations.
The Treasury Department blocked an effort by the Pentagon to add the two Internet companies on the grounds that they were helping the military, the person said, asking not to be identified in private negotiations. Authorities also discussed blocking the search leader Baidu Inc., but gave up on the plan, the person added. Alibaba’s shares in Hong Kong rose by 3.9%, while Tencent rose by almost 5% with news of the extension, first reported by the Wall Street Journal. Your dollar bonds spread tight Thursday morning.
The decision removes the uncertainty that hangs over Chinese social media and gaming leader Tencent and Alibaba, the e-commerce titan founded by billionaire Jack Ma who is now under intense regulatory scrutiny by Beijing regulators. President Donald Trump has signed an amended version of his executive order that prohibits investment in Chinese military companies, the White House said in a statement. statement Wednesday that it did not mention any company by name.
The imposition of a ban on the pair would have marked the most dramatic escalation to date for outgoing management, given the size of the two companies and the difficulty of undoing positions. At more than $ 1 trillion, its combined market value is almost double that of Spain’s stock market, while companies together account for about a tenth of the Emerging Markets Reference from MSCI Inc ..
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Citing national security, Trump had already signed an executive order in November requiring investors to withdraw from Chinese companies linked to that country’s armed forces. The Defense Department will add more companies to the list, the person said without giving further details.
This would further damage the relationship between the two largest economies in the world, which have clashed over everything from Covid-19 to Hong Kong. Authorities in Washington stepped up efforts to deprive Chinese companies of U.S. capital in the final months of the Trump administration, heightening economic tensions as President-elect Joe Biden prepares to take over this month.
Harsh measures at times sowed confusion in the markets and caused price fluctuations, such as when the New York Stock Exchange reversed the course twice when deciding to withdraw three Chinese telecommunications companies. The NYSE is now continuing its original delisting plan after US Treasury Secretary Steven Mnuchin disagreed with his decision to grant companies a pardon.
Trump’s order banned the trading of affected bonds as of Jan. 11. If Biden leaves Trump’s executive order in place, U.S. investment companies and pension funds will be forced to sell their stakes in companies linked to the Chinese army by 11 November. And if the United States determines that other companies will have military ties in the future, American investors will have 60 days from that determination to disband.
– With the help of Catherine Ngai
(Hong Kong stock updates and second paragraph graph)