What happened
Shares of Tencent (OTC: TCEH.Y), Alibaba (NYSE: BABA), en JD.com (NASDAQ: JD) fell 7.4%, 5.1%, and 4.3%, respectively, after the U.S. government took several actions against Chinese companies.
So what
President Trump has banned popular Chinese-owned social media platforms TikTok and TenC-owned WeChat, which go live in about six weeks. The move threatens to separate bonds for people living in the US and using the apps to communicate with friends, family and business colleagues in China. It could also damage trade relations between the US and China, making it more difficult for American companies to source their products from Chinese manufacturers.
Chinese internet campaigns ended Friday. Image Source: Getty Images.
The ban on WeChat could have been particularly impactful. The app – which also serves as a messaging and digital payment platform – is used by more than 1 billion people around the world, many of whom live in the US
Now what
A significant part of Alibaba’s business is derived from US e-commerce companies, which buy goods from Chinese manufacturers and sell them in the US and internationally. JD.com has also taken steps in recent years to expand its partnerships with U.S. companies, which may now come under increased control of government officials.
Tencent obviously has the most to lose. Trump’s ban on WeChat also raises the question of whether Tencent will be able to continue investing in US-based companies, as it has done several times in recent years.
For these reasons, US investors should now view these Chinese internet titans as significantly riskier investments than they were just a few days ago.
