Source: Financial Times
US officials are considering prohibiting Americans from investing in Alibaba and Tencent, with an investment ban.
Tracing back: The original blacklist was announced in November targeting 31 Chinese firms that “is related to Chinese military”. The firms on the list include large state-run aerospace, shipbuilding, construction firms, and tech companies such as the video-surveillance-equipment maker.
It’s a market-quake
If implemented, 7 out of the top 10 shareholders of Alibaba will be forced to unwind their position, namely:
- BlackRock (3.3%, 2nd largest), T. Rowe Price (2.4%), Vanguard (2.3%), Fidelity (1.5%), State Street (1.47%), Capital Group (1.42%), and JP Morgan (1.42%).
- FYI: Almost all the big names you can think of are sharing slices, such as UBS, Invesco, HSBC which are also among the top shareholders.
Alibaba + Tencent = 2x Spain’s Stock Market
The discussions of authorities partly focus on how such a move might affect capital markets, given the mega-size of US investment in the two firms. The market value of Alibaba and Tencent’s primary listings top USD 1.3 tln, nearly twice the size of Spain’s stock market.
How did the market react?
#1 Tech sell-off: Alibaba fell 3.9% and Tencent dropped 4.7% in Hong Kong on Thursday, tracking losses in their New York-listings.
#2 HSBC and other banks’ benefitted, as investors in Hong Kong shift their capital away from Alibaba, Tencent, and telecom stocks after the news.
- HSBC gained 4.6%, following its 10% rally in London the day prior.
Looking ahead… If the ban is implemented, it is way more impactful than the original blacklist, and would even impact the capital markets.