Key Highlights:
Shares of Tencent fell 7% in Hong Kong as the US DoD targeted Chinese military companies.
Tencent’s US depository receipts received about 8% US listings.
Battery maker CATL fell 2.8% in Shenzhen.
Key background:
Shares of Tencent Holdings fell 7% in Hong Kong trading on January 6, after the company appeared on a list released by the US Department of Defense of Chinese military companies. Tencent’s US depositary receipts fell nearly 8% yesterday on Wall Street.
Tencent, one of China’s leading technology companies, has been added to the US Department of Defense’s list of organizations suspected of having ties to the Chinese military. The move is part of ongoing US efforts to limit the flow of high-tech to China. In addition to Tencent, other notable companies, such as battery manufacturer CATL—an important part of the supply chain for automakers such as Ford and Tesla—were also added to the list. CATL lost 5.6 percent of shares, although they later recovered slightly to fall 2.8 percent in Shenzhen.
The National Defense Authorization Act of 2024 prohibits the Department of Defense from purchasing goods or services from companies listed here after June 2026 and indirect purchases, beginning in June 2027. Tencent immediately responded to the listing by strongly denying any relationship with it. soldiers. They simply call the listing a mistake. It said that since it is not a military company and does not engage in these defense contract services, this will not affect it either. CATL also refuses to be included in such a list because it does not participate in anything related to the war.
Analysts include Ivan Su of Morningstar who said Tencent could be delisted in a legal battle. The company’s business model is based on social media and online games and its activities are not closely tied to military projects. This also reflects the strategy of the US, which aims to reduce the transfer of important technologies to China, since the ban on Huawei and other Chinese companies in the past few years.
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