U.S. officials weigh adding Alibaba, Tencent to investment ban

Senior U.S. officials are debating whether to bar investments in Alibaba Group Holding Ltd. and Tencent Holdings Ltd., according to people with knowledge of the talks, potentially expanding a Wall Street blacklist that’s already cost shareholders billions of dollars.

The State, Defense and Treasury departments are among authorities involved in the deliberations, said the people, speaking on the condition they not be named because the talks are confidential. Alibaba and Tencent are two of China’s most valuable companies, and their equity securities are widely held by U.S. investors.

U.S. authorities have been ramping up efforts to deprive Chinese companies of U.S. capital in the final months of President Trump’s administration, adding to economic tensions as President-elect Joe Biden prepares to take over this month.

Hasty measures have at times sown confusion in markets and prompted price swings, such as when the New York Stock Exchange reversed course twice this week on a decision whether to delist three major Chinese telecommunications companies.

The stock exchange decided to go ahead and delist them after U.S. Treasury Secretary Steven T. Mnuchin disagreed with its earlier shock decision to give the companies a reprieve.

The discussions among senior U.S. officials involving Alibaba and Tencent focus in part on how such a move might affect capital markets, according to a Wall Street Journal report on the talks earlier Wednesday. Representatives for the companies didn’t immediately respond to messages seeking comment.

Alibaba and Tencent stocks stumbled after the news Wednesday, dragging down other Chinese stocks that trade in the U.S.

The closely watched iShares China Large-Cap ETF fell 1.2% while the NASDAQ Golden Dragon China Index, which tracks other large Chinese technology stocks, dropped 2.1% for its worst day since November. Alibaba fell 5.3%, Tencent slumped 4% and JD.com slipped 7.7%.

Alibaba ADRs and Tencent ADRs see daily trading volume on average of 18.6 million and 3.8 million, respectively, far outstripping the volume of trades in the U.S. for the three telecom stocks.

Citing national security, Trump previously signed an executive order in November requiring investors to pull out of Chinese companies linked to that nation’s military. On Tuesday, Trump signed an order banning U.S. transactions with eight Chinese apps, including Ant Group Co.’s Alipay and Tencent’s digital wallets. It will be up to Biden to decide whether to enforce that policy once it takes effect.