US officials deliberated, but eventually decided not to ban US investment in Alibaba Group Holding Ltd. and Said Tencent Holdings Ltd., a person familiar with the talks, removing a cloud of uncertainty over Asia’s two largest corporations.
The Treasury Department blocked the Pentagon’s effort to add the two Internet companies on the grounds that they helped the military, the person said, asking not to be identified while discussing private talks. Officials also debated blocking the search leader Baidu Inc., but gave up the plan, the person added. Alibaba’s Hong Kong shares rose up 3.9%, while Tencent rose nearly 5% on the deferral news, which was first reported by the Wall Street Journal. Their dollar bonds are spreading tight Thursday morning.
The decision removes uncertainty over Chinese social and gaming leaders Tencent and Alibaba, the e-commerce titan founded by billionaire Jack Ma, which is now under heavy regulatory control by Beijing authorities. President Donald Trump has signed an amended version of his executive order banning investment in Chinese military companies, the White House said in a statement. statement Wednesday that did not mention any company by name.
Imposing a ban on the pair would have marked the most dramatic escalation of the outgoing administration so far, given the simple size of the two companies and the difficulty of developing positions. With more than $ 1 trillion, their combined market value is almost twice that of the Spanish stock market, while companies together account for a tenth of the MSCI Inc.’s Emerging Markets Reference Markets
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Citing national security, Trump previously signed an executive order in November urging investors to give up Chinese companies linked to the nation’s military. The Department of Defense will add more companies to the list, the person said without elaborating.
This would further destroy the relationship between the world’s two largest economies, which collided from Covid-19 to Hong Kong. Washington authorities have stepped up efforts to deprive Chinese companies of US capital in the last months of the Trump administration, adding to economic tensions as President-elect Joe Biden prepares to take over this month.
The heavy measures have sometimes caused confusion in the markets and led to price fluctuations, such as when the New York Stock Exchange reversed twice on the decision to write off three Chinese telecommunications companies. The NYSE is now continuing with its original write-off plan after US Treasury Secretary Steven Mnuchin disagreed with his decision to offer the companies a deferral.
Trump’s order banned trading in affected securities since Jan. 11. If Biden leaves Trump’s executive order in effect, US investment firms and pension funds would be forced to sell their stakes in Chinese military-related companies by November 11th. And if the US determines that other companies have military ties in the future, US investors will be given 60 days from this decision to divest.
– With the assistance of Catherine Ngai
(Updates to the Hong Kong action and chart in the second subparagraph)