Tencent loses billions of dollars as Trump Signed an Executive order on TikTok and WeChat

The U.S. president’s executive order sparked fear that the worsening relationship between the U.S. and China would weigh on businesses, economies, and markets.

KEY POINTS:

• Shares of Chinese tech firms listed in Hong Kong fell by Friday afternoon after U.S. President Donald Trump issued executive orders targeted at major tech firms Tencent and ByteDance.
• The Hang Seng Tech index, which tracks the 30 largest technology companies listed in Hong Kong that pass the screening criteria, also fell 3.37%. In mainland China, the Nasdaq-style start-up board ChiNext slipped 2.828%.
• Shares of Hong Kong-listed Tencent plunged more than 4% during trade on Friday afternoon, after U.S. President Donald Trump issued executive orders targeting Chinese apps WeChat and TikTok.
• WeChat is owned by Chinese tech giant Tencent, while short-video-sharing app TikTok’s parent company ByteDance is based in Beijing.
• While the wording of order is unclear, video game companies, Tesla, Snap, and pro sports leagues could be set scrambling.

Did President Donald Trump just blow up the U.S. video game industry?

That was the question on a lot of minds after Trump issued executive orders Thursday night banning “transactions” with the Chinese owners of the TikTok and WeChat apps starting Sept. 20. While the move against TikTok’s owner Beijing-based Bytedance was not a huge surprise, action against WeChat’s owner Shenzhen-based tech giant Tencent Holdings Inc. was.

That’s because Tencent is one of the world’s largest and most valuable companies, with ownership stakes in several U.S. video game companies, including Riot Games, which makes “League of Legends”; Epic Games, which makes “Fortnite”; and Activision Blizzard ATVI, +2.98%, which makes “World of Warcraft.”

Tencent also has significant stakes in Tesla Inc. TSLA, +0.30%, and Snap Inc. SNAP, -1.61%, the maker of Snapchat, and the Chinese company has streaming deals in place with the NBA, the NFL, and Major League Baseball. The order could potentially also affect Apple Inc. AAPL, +3.48%, and Alphabet’s GOOGL, +1.74% GOOG, +1.79% Google app stores, which feature Tencent-owned apps.

The decision by the Trump administration to bar U.S. citizens from doing business with Tencent Holdings Ltd.’s WeChat app rippled through Chinese markets, erasing $46 billion from the market cap of the Internet giant, and sending the yuan to its largest fall in two weeks.

U.S. Secretary of State Mike Pompeo said earlier this week that the Trump administration wants to see “untrusted” Chinese apps like WeChat and TikTok removed from U.S. app stores.

Pompeo detailed a new five-pronged “Clean Network” effort aimed at curbing potential national security risks and said because those apps have parent companies based in China, there were “significant threats to personal data of American citizens, not to mention tools for Chinese Communist Party content censorship.”

In the mainland, the Shanghai Composite Index also declined, falling 0.6 percent to 3,364, which put it on track to snap a five-session winning streak.

New data from China-backed up earlier signals that China’s economy is recovering from the virus.
China’s exports surged 7.2 percent from a year earlier in US dollar terms, according to data released by the Chinese Customs Administration. That was better than what analysts expected. Imports fell by 1.4 percent compared to the previous year.

Meanwhile, Microsoft is in talks with ByteDance to acquire TikTok’s business in the U.S., Canada, Australia, and New Zealand within the next three weeks, ahead of a Sept. 15 deadline.
Response from Hong Kong government:

The Hong Kong government came to the defense of the Hong Kong stock exchange after US President Donald Trump said that investors would prefer raising funds elsewhere as the city’s special status was revoked.
The government said the Hong Kong exchange would continue to be the fundraising destination of choice for companies and attract more investors, pointing out that it was the world’s largest initial public offering market in seven of the past 11 years.

As of July this year, IPOs in Hong Kong reached HK$132.1 billion (US$17.04 billion), while average daily turnover stood at HK$124.8 billion, an increase of more than 40 percent from the average daily turnover last year.
“This fully demonstrates the recognition and confidence of international participants in Hong Kong’s financial system,” the Financial Services and the Treasury Bureau said in a statement on Thursday evening.