US Considers Adding Alibaba, Tencent To China Stock Ban: Report

The Trump administration is considering adding tech giants Alibaba and Tencent to a blacklist of firms allegedly owned or controlled by the Chinese military, two people familiar with the matter said on Wednesday. Targeting Asia’s two most valuable companies, worth a combined $1.3 trillion, would be U.S. President Donald Trump’s most dramatic step yet in a recent raft of measures unleashed against Chinese companies as he seeks to cement his hardline policy against Beijing during his final days in office. Defense Department officials, who oversee the blacklist designations, have not yet finalized plans and are also discussing adding other Chinese firms to the list, the sources said, speaking on condition of anonymity because the deliberations are private.

Both companies declined to comment. The discussions were first reported by the Wall Street Journal. Shares in Alibaba, China’s biggest e-commerce firm, and Tencent, a gaming and social media behemoth, were down roughly 4 per cent in afternoon trade on the Hong Kong Stock Exchange. Alibaba’s U.S.-listed shares closed down just over 5 per cent on the news on Wednesday.

Some investors expressed skepticism, however, that Alibaba and Tencent would face long-term restrictions – given that they are worth a combined $1.3 trillion, widely held by U.S. investors and the likely reputational and financial hit to U.S. stock markets. “It’s a very bad policy and there’s enough money in Asia, lots and getting bigger, that one shouldn’t force these companies out of America,” said Thomas Caldwell, chairman of Caldwell Investment Management in Toronto and an investor in the New York Stock Exchange. “Money and markets should be neutral.” 

Trump escalated measures against Chinese firms in November with an executive order that bans U.S. investors from buying shares of Chinese firms. On Tuesday, he ordered a ban on transactions with eight Chinese software applications, including Ant Group’s Alipay mobile payment app and Tencent’s QQ Wallet and WeChat Pay.

The November executive order sought to give teeth to a 1999 law that tasked the Defense Department with drafting a list of Chinese companies deemed to be owned or controlled by the Chinese military.  The Pentagon has so far blacklisted 35 firms, including China’s top chipmaker SMIC and oil giant CNOOC. 

While release of the November directive prompted index providers like MSCI to begin deleting blacklisted companies from their indexes, confusion about the scope of the rules has prompted some dramatic flip-flops by the New York Stock Exchange in recent days.