US consumers include Alibaba, Tencent to China stock ban

In recent weeks, officials from the State Department and Department of Defense have negotiated an expansion of a blacklist of companies banning US investment due to claimed ties to China’s military and security services. The US government announced its original blacklist in November with 31 companies.

People said that the addition of these companies has led to a debate with the Treasury Department over whether these companies could have broader capital-market effects. People said that the plan is still under consideration and that its impact on markets may not be debated by agencies.

Tencent and Alibaba are China’s two most valuable publicly listed companies with a combined market capitalization of over $ 1.3 trillion, and their shares are held by scores of American mutual funds and other investors. If enacted, the move would be a major boost from the exit by the Trump administration over its efforts to ease the hold of American investors in major Chinese companies.

The Trump administration has stepped up efforts to approve Chinese companies in their last days. On Wednesday, the New York Stock Exchange said it would go on to pursue China’s three largest telecommunications carriers, overturning an earlier decision to scrap the plan after receiving “new specific guidance” from the Treasury Department .

On Tuesday, President Trump signed an order prohibiting American individuals and companies from transacting with eight Chinese software apps with Alibaba affiliate Ant Group Company’s Alipay and Tencent’s WeChat Pay. After the inauguration of President-Elect Joe Biden, the order goes into effect in 45 days.

The biggest Chinese companies by market value

Alibaba and Tencent are tracked by major indices, including those created by MSCI Inc.

And FTSE Russell. Alibaba is listed in both New York and Hong Kong, and is heavily placed in the Hong Kong-listed Tencent Broadly Global Stock Index. Like most foreign companies, stocks are not included in the Nasdaq Composite, the S&P 500 or the Dow Jones Industrial Average.

In the last few weeks of the Trump presidency, US government officials have clashed over the scope of the list of companies off limits to US investors. Pentagon and state officials are emphasizing a wide-reaching list that includes high-profile companies and subsidiaries of companies already designated in China. Agencies have urged a tighter line to block China’s military and security services’ access to data troves, advanced technologies and expertise. Treasury, forced sell-offs could hurt financial markets, and seeks more narrow inventories.

The Pentagon, the lead agency managing the list, had no immediate comment. The State Department and the Treasury Department had no immediate comment.

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

China’s Ministry of Commerce did not respond to a request sent outside of business hours, and the Chinese embassy in the US quoted a December Foreign Ministry comment that “China strongly opposes the strict suppression of Chinese companies by the United States” Does., “And” The Chinese government will continue to protect the legitimate and legitimate rights and interests of Chinese companies. “

Although Alibaba and Tencent are not controlled by the Chinese government, the State Department and the Pentagon have long stated that they fear the companies may be forced into sharing sensitive data on businesses with the US government and the Chinese government and to Beijing. Can serve as a drain. Increase its effect.

Over the years, millions of Chinese tech companies have raised millions of dollars from US and international investors, helping foreign investors capitalize on China’s fast-growing economy.

Alibaba and Tencent are among the top constructors in the MSCI Emerging Markets Index, accounting for 11% weighting as of December 31. Similarly, both together claimed 12% weighting in the FTSE Emerging Index.

Following the November list, the Pentagon expanded its list of banned companies to include companies such as China’s top chip maker Semiconductor Manufacturing International in December Corp.

And Oil Major China National Offshore Oil Corp

In August, the State Department said that the US needed to address the threats to cloud-based systems operated by Alibaba, Tencent and Baidu Inc.

US officials have become concerned in recent weeks that Alibaba and Ant come under intense scrutiny at home, further putting them at the mercy of Beijing, according to one of the people familiar with the case.

The Chinese government has recently clamped down on its tech champion, unveiling comprehensive antitrust regulation aimed at the country’s largest Internet platforms, launched an investigation into Alibaba and investigated Ant’s blockbuster initial public offering.

In the latest episode, Chinese regulators are trying to share ants with credit-consumer data collected with the central bank’s credit-reporting system, The Wall Street Journal reported.

Tencent operates the extremely popular WeChat app, which has become one of the most powerful tools for monitoring the public in Beijing’s arsenal. Tencent also bets in several US videogame companies.

T. Key US asset managers including Rowe Price Group Inc.

black Rock Inc.

According to FactSet data, Vanguard Group is among Alibaba and Tencent’s top public shareholders through funding.

Asset managers are lobbying to prevent a situation in which companies like Alibaba could be blacklisted, a person familiar with large financial firms’ interactions with US regulators said.

Last week, the Treasury Department published guidelines that include subsidiaries in the ban if the company named on the list owns 50% or more of them. Derivatives, bonds and depository receipts, as well as exchange-traded funds, index funds, and mutual funds issued by these entities in any jurisdiction, will also be restricted to US investors.

Write Don Lim at [email protected], Jing Yang at [email protected] and Gordon Lubold at [email protected]

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