Tencent Stock Drops After Firm Is Targeted by Trump Executive Order
August 07 2020 - 1:51AM
Dow Jones News
By Chong Koh Ping and Xie Yu
Shares of Tencent Holdings Ltd. plunged as much as 10% on
Friday, hours after President Trump signed an executive order that
would bar U.S. entities from transacting with the Chinese internet
giant and its popular social-media app, WeChat.
Tencent's shares, which are listed in Hong Kong, started
tumbling when the market opened and were down 6.8% by noon after
paring earlier losses. The benchmark Hang Seng Index, which the
stock is a large constituent of, was down 2.3%.
Just before the news, Tencent shares were trading near a record
high and the company's market capitalization had been close to that
of Facebook Inc.
On Thursday evening in Washington, Mr. Trump issued a pair of
executive orders that would impose limits on WeChat as well as
TikTok, escalating tensions with Beijing. The orders bar people in
the U.S. or individuals who are subject to U.S. jurisdiction from
transactions with the China-based owners of both apps, effective 45
days from Aug. 6.
The order on WeChat didn't detail what kind of transactions
would be affected, but the ramifications could be wide-ranging. The
popular social-media app, which is used for messaging, mobile
payments and scores of other functions, has more than 1.2 billion
users in mainland China and elsewhere.
WeChat has also been downloaded by people in the U.S. and other
countries. And many American companies with businesses in China
currently use its wide-reaching social media platform to market
their products and services to consumers in the world's most
populous nation.
Shenzhen-based Tencent is also one of the world's largest
videogame companies and its games are played by people
world-wide.
Analysts who follow Tencent were scrambling Friday to figure out
how much of the company's business could be affected.
"The impact on Tencent will be very limited if the sanction is
targeted only at WeChat, rather than a full-blown attack against
Tencent's business in the States," said Billy Leung, an analyst
with Haitong International Securities Co. in Hong Kong.
Before Friday, Tencent shares had been on a tear, gaining 48% in
the year to date period. As of Thursday, the company had a market
capitalization of $687 billion, making it China's second-most
valuable listed company after Alibaba Group Holding Ltd. Alibaba's
Hong Kong-listed shares were down 4.6% at midday.
Tencent has been a beneficiary of people spending more time at
home and online during the coronavirus pandemic, chatting with
friends, playing videogames and making more purchases online using
its apps.
Stock indexes across Asia were lower on Friday. The Shanghai
Composite Index fell 1.5% by midday and the Nikkei 225 was down
0.8%.
"The escalating geopolitical tension between China and the U.S.
is weighing on sentiment" and on technology stocks, said Khiem Do,
head of greater China investments at Barings in Hong Kong. He said
a recent strong run-up in the stock prices of many technology
stocks in Asia could also make them more vulnerable to a
selloff.
Charmian Aw, a lawyer who specializes in information technology,
privacy and data security at Reed Smith LLP in Singapore, said
since the executive order only cites WeChat, it is unlikely that
other parts of Tencent's tech empire will be affected.
"But we will need to wait for the exact details of transactions
covered by the order to be issued," she said.
Write to Chong Koh Ping at chong.kohping@wsj.com and Xie Yu at
Yu.Xie@wsj.com
(END) Dow Jones Newswires
August 07, 2020 01:36 ET (05:36 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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