Wall Street Journal: U.S. considers banning investment in Tencent, Alibaba stock

The Wall Street Journal reports that U.S. officials are considering adding Tencent, the parent company of communications software WeChat, and e-commerce giant Alibaba Group to the ban on Chinese securities investments. The impact of the measure on the U.S. financial markets is unknown, and the relevant ministries are still discussing it.

Tencent and Alibaba are two of China’s largest publicly traded companies by market capitalization, with a combined market value of more than $1.3 trillion, and many U.S. mutual funds and investment institutions hold shares in both companies. President Trump‘s administration intends to get U.S. investors out of large Chinese companies, and adding Tencent and Alibaba to the list would be a major upgrade to the investment ban.

Alibaba’s shares fell 6 percent in New York trading after the report was published.

The U.S. announced last November a list of 31 companies that Washington has identified as being linked to the Chinese Communist Party’s military, and ordered U.S. companies and individuals not to invest in related securities starting Jan. 11 this year, and to clear their holdings by November at the latest. The list of “Chinese Communist Party military companies” has since been expanded to 35, and State Department and Defense Department officials have reportedly discussed in recent weeks whether to add more companies to the list.

Citing sources familiar with the matter, the report said State and Defense Department officials have discussed with the Treasury Department whether adding Tencent and Alibaba to the list would have a significant ripple effect in the capital markets. The plan is still under consideration and may not pass muster as the relevant ministries discuss the market impact.

On the other hand, the New York Stock Exchange (NYSE) changed its mind twice in three days and announced today that it is reopening the listing process for the American Depositary Receipts (ADRs) of China’s three largest telecom companies in accordance with the above-mentioned ban. Trading of China Mobile, China Telecom and China Unicom ADRs will be suspended from 4:00 a.m. EST on the 11th.

Trump signed an executive order yesterday banning U.S. individuals and businesses from trading through eight Chinese payment platforms, including Alibaba affiliate Ant Group’s Alipay and Tencent’s WeChat Pay. The ban takes effect in 45 days.

Tencent is listed in Hong Kong, while Alibaba is listed in both New York and Hong Kong. The two companies’ shares are not included in the three major U.S. stock indices, but a number of important indices compiled by MSCI Minnesota and FTSE Russell include these two weightings.