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The United States weighs adding Alibaba and Tencent to the China Stock Ban

The United States weighs adding Alibaba and Tencent to the China Stock Ban

US officials are considering banning Americans from investing in Alibaba Group Holdings Limited and Tencent Holdings Limited, a possible escalation of the outgoing Trump administration’s efforts to dispossess US investors’ holdings in major Chinese companies.

State and Defense officials have discussed in recent weeks expanding a blacklist of companies banned from US investments due to alleged ties to Chinese military and security services, according to people familiar with the matter. United States government Advertise his original blacklist In November with 31 companies.

Tencent and Alibaba are two of the most valuable companies in China, with a combined market capitalization of more than $ 1.3 trillion and dozens of US mutual funds and other investors who own their shares. Alibaba units listed in the US tumbled more than 5% on Wednesday, and Tencent tumbled about 4%.

The largest Chinese company by market value

The blacklist is one of many efforts of the Trump administration related to investing in Chinese companies. Also Wednesday, the New York Stock Exchange said it would remove three major Chinese telecoms companies targeted by Trump’s executive order, after canceling the plan earlier after “specific new directives” from the Treasury.

Investment decisions aren’t the only steps the Trump administration has taken.

After decades of policy widely aimed at developing closer ties, the United States has taken a tougher line against China in the business, politics, trade and markets that have proliferated in the global economy.

American companies have also turned, with Some relocate production outside of China And others closely Security checked their trade secrets there. Wall Street, which has long sought to increase the link between the two countries ‘financial markets, is now dealing with the increased risks of tying investors’ money to China.

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The State and Defense departments have discussed with the Treasury Department whether adding Alibaba and Tencent to the US blacklist would have widespread implications for capital markets, people familiar with the matter said. People added that the plan is still under discussion and may not be sustained.

Alibaba and Tencent are tracked through major indicators including those created by MSCI Inc. And FTSE Russell. Alibaba, listed in both New York and Hong Kong, and Hong Kong-listed Tencent are among the heaviest in the widely followed global stock indices. Like most foreign companies, stocks are not included in the Nasdaq Composite, S&P 500, or Dow Jones Industrial Average.

Days before the Chinese fintech giant Ant Group was due to go public in what would have been the world’s largest list, regulators suspended the plans. WSJ’s Quentin Webb explains the sudden turn of events and what the IPO suspension means for Ant’s future. Photo: Ali Song / Reuters

In the final weeks of Trump’s presidency, the US authorities did They clashed over the scope of the list of companies American investors are prohibited. Pentagon and state officials have followed a broader list that includes notable companies and many subsidiaries of companies already named in China. She urged agencies to take a tougher stance to curb Chinese military and security services have access to data setsAdvanced technologies and experience. The Treasury, concerned that the forced selling could destabilize financial markets, wanted a narrower list.

The Pentagon, the main agency managing the list, had no immediate comment. There was no immediate comment from the State Department and Treasury.

An Alibaba spokeswoman did not respond to requests for comment. A Tencent spokesman declined to comment.

The Chinese Ministry of Commerce did not respond to a request for comment sent outside business hours, and the Chinese Embassy in the United States indicated a comment in December by the Ministry of Foreign Affairs stating that “China strongly opposes the brutal suppression of Chinese companies through the United States” and “the Chinese government will continue.” Protecting the legitimate and legal rights and interests of Chinese companies. “

While Alibaba and Tencent are not under the control of the Chinese government, the State Department and the Pentagon have long voiced their concerns that the two companies could be forced into sharing data about US citizens and companies, which could serve as a channel for expanding Beijing’s influence.

In a separate move earlier this week, President Trump signed an order banning US individuals and companies from doing business with eight Chinese software applications, including Alipay, a subsidiary of Alipay, and Tencent’s WeChat Pay. The order will go into effect within 45 days, following the inauguration of President-elect Joe Biden on January 20.

Then on Wednesday the New York Stock Exchange said about trading in US stocks listed in

China Mobile Ltd.

And the

Chinese Telecom Corp.

And the

China Unicom (Hong Kong) Ltd.

Will be held at 4 AM ET on Monday.

The stock market reversal is likely to raise more questions about its handling of the three Chinese stocks. The New York Stock Exchange said last week it would remove the three companies from the list in compliance with Mr Trump’s order, only to change course on Monday and say it has not removed them.

A person familiar with the matter attributed the New York Stock Exchange’s decline on Monday to the ambiguity over whether the three companies were involved. But the new directive, which the Treasury Department shared with the stock exchange late Tuesday, made clear that the companies should be written off. The Treasury Department posted this directive online on Wednesday morning.

The Trump administration and supporters of the hard line against Beijing criticized the stock market reversal. Treasury Secretary Steven Mnuchin called NYSE President Stacy Cunningham to express his objections.

The past year has seen several moves that could cut a recurring investment pipeline between US investors and Chinese companies.

In recent years, dozens of Chinese technology companies have raised tens of billions of dollars from American and international investors, allowing foreign investors to benefit from China’s fast-growing economy. As of December 31, Alibaba and Tencent were among the main components of the MSCI Emerging Market Index, with an overall weightage of 11%. Likewise, the two together achieved a 12% weight in the emerging FTSE Index as of December 31.

After issuing its blacklist for November, the Pentagon expanded it in December to include companies such as the major Chinese semiconductor chip maker and the oil giant China National Offshore Oil Company.

The State Department said in August that the United States needs to address the threats posed by the cloud-based systems managed by Alibaba, Tencent, and Baidu Inc. US officials have become increasingly anxious in recent weeks as the increased scrutiny faced Alibaba while you are in China, putting at the mercy of Beijing, has raised concerns among US officials in recent weeks, according to one person familiar with the matter.

The Chinese government tightened its control over domestic tech companies recently, unveiling a comprehensive antitrust regulation targeting the country’s largest internet platforms, launching an investigation into Alibaba and canceling Ant’s flagship IPO. The organizers are She is trying to convince Ant to share his consumer credit data set The Wall Street Journal reports that it has accumulated with the credit reporting system of the Chinese central bank.

Tencent operates the hugely popular WeChat app, which It became one of the most powerful surveillance tools in Beijing. Tencent also has stakes in several US video game companies.

And according to FactSet data, the major US asset managers, including T. Rowe Price Group Inc. And BlackRock Inc. And Vanguard Group, are among the major public shareholders of Alibaba and Tencent through funds.

A person familiar with the big financial firms’ conversations with US regulators said asset managers are pressing to prevent companies like Alibaba from being blacklisted.

The Treasury Department said last week that investors would be banned from investing in both blacklisted companies and subsidiaries owned 50% or more by a listed company. Derivatives, bonds, and depository receipts – in addition to exchange-traded funds, index funds, and mutual funds that hold securities issued by these entities in any jurisdiction – will also be restricted to U.S. investors.

Write to Dawn Lim at [email protected], Jing Yang at [email protected], Gordon Lubold at [email protected] and Alexander Osipovich at [email protected]

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