Tencent Holdings Ltd. shares dropped around 5% during the London trading session, following an executive order issued by President Trump banning US transactions with WeChat and TikTok in the next 45 days.
Escalating economic war between China and the United States is largely disrupting respective tech companies. As of Friday, during the early London trading session, shares of Tencent Holdings Ltd., standing behind the messaging app, WeChat, dropped nearly 5%, because on Thursday President Donald Trump issued executive orders banning U.S. transactions with Chinese tech firms Tencent and ByteDance for the next 45 days.
The underlying push and pull in bid to control global tech is dividing the leading economies further. Tencent shares have been on the rise despite the global coronavirus market disruptions. According to its market data history, the stock price has been up 39.51% year to date, and up 54.75% in the past one year.
Despite having a huge market command in China where the population is dense, losing the US market will be a huge blow for the company. With the unpredictable nature of the Trump administration, Tencent shares will be highly volatile in the coming months due to its uncertainty.
Wider Scope of Tencent and TikTok Future U.S. Relationship
With the scope of the ban still unclear, the executive orders stated that after the 45 days, Secretary of Commerce Wilbur Ross “shall identify the transactions” that will be subjected to the prohibition. Trump stated in the executive order:
“WeChat automatically captures vast swaths of information from its users. This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information”.
The order further prohibits any transaction that is related to WeChat by any person, or with respect to any property, subject to the jurisdiction of the United States, with Tencent Holdings Ltd.
The direct attack on Chinese tech companies by the Trump administration is a clear indication of the sore relationship between the two nations. This comes a time when the two should probably be uniting to find a common solution for the global coronavirus pandemic.
As for TikTok, Trump said:
“It may be used for disinformation campaigns that benefit the Chinese Communist Party.”
He further stated that the United States must take aggressive action against the owners of TikTok to protect our national security.
Talks of Microsoft taking over TikTok operations in the US continues, with the Chinese referring to it as theft. The bigger picture of all these cold economic wars remains unclear as the United States approaches its presidential election.