South African media company Naspers bought 46.5% of Tencent for just $32m in 2001. The Tencent share price has soared since then, playing into the value of Naspers. Tencent is now held by Naspers-controlled Prosus, which became Europe’s biggest listed consumer internet firm when it floated on the Amsterdam stock exchange last year. Tencent stock plunged after Trump banned the use of its popular social media app, WeChat, in the US. In 2019, Tencent ranked as the world’s biggest games publisher by revenue. Though Trump’s order is vague about the extent of the ban, it could prevent any US companies from interacting with Tencent. According to Bloomberg, this would not only freeze billions of dollars of commerce, but it could completely shut down communication between the US and China. A similar ban looms for ByteDance Ltd.’s TikTok. Bloomberg notes that Trump’s move to ban TikTok and WeChat beginning 45 days from now has sent shockwaves through the tech industry and the many US businesses that rely on the apps to sell goods in China. – Claire BadenhorstÂ
Tencent stock drops after firm is targeted by Trump executive order
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 US entities from transacting with the Chinese internet giant and its popular social media app, WeChat.
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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 capitalisation 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 US or individuals who are subject to US jurisdiction from transactions with the China-based owners of both apps, effective 45 days from August 6th.
Read also: Microsoft and TikTok deal may continue after all – Wall Street Journal
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 US 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 video game companies and its games are played by people worldwide.
Analysts who follow Tencent were scrambling on 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 capitalisation of $687bn, 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 video games 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%.
Read also: Naspers pushes SA stocks back into recovery
“The escalating geopolitical tension between China and the US 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 specialises 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.
—Jing Yang contributed to this article.
Write to Chong Koh Ping at [email protected] and Xie Yu at [email protected]
