Tencent loses US$46 billion as WeChat ban rocks China, Hong Kong stocks and yuan

Before the drop Tencent was worth US$686 billion, making it the world's eighth-largest by market capitalisation. PHOTO: REUTERS

SHANGHAI (BLOOMBERG, REUTERS) - The Trump administration's move to ban US residents from doing business with Tencent Holdings' WeChat app rippled through Chinese markets, on Friday (Aug 7) erasing US$46 billion (S$63 billion) from the Internet giant's market value and sending the yuan to its biggest slump in two weeks.

The US president's executive order, which also applied to ByteDance's TikTok, fueled concern that the deteriorating US-China relationship will weigh on companies, economies and markets. Confusion over the scope of the order led to volatile trading on Friday, with Tencent plunging more than 10 per cent before paring its loss to 6.8 per cent at the midday break.

China's CSI300 index fell 1.7 per cent to 4,682.02 points at the end of the morning session, while the Shanghai Composite Index lost 1.5 per cent to 3,337.43 points.

The Hang Seng index dropped 2.3 per cent to 24,364.43 points, while the Hong Kong China Enterprises Index lost 2.1 per cent to 9,989.69 points.

Tech stocks fell across the board on Friday. By the midday break, Shenzhen's tech-heavy start-up board ChiNext fell 2.6 per cent, the newly launched STAR 50 index shed 3.5 per cent, while the Hang Seng tech index slumped 4.7 per cent.

The yuan eased from a five-month high hit a day earlier as deteriorating US-China relations dented investor sentiment. The onshore yuan fell 0.2 per cent to 6.9670 per US dollar. Offshore, the yuan headed for its biggest daily decline in two weeks.

Before Friday's drop Tencent was worth US$686 billion, making it the world's eighth-largest by market capitalization and bigger than Berkshire Hathaway Inc. Its huge size means it occupies a dominant position on global indexes. The firm accounts for more than 6 per cent of MSCI Inc's developing nation gauge and 4 per cent of its Asian Pacific measure.

"The US government is expected to follow up with more measures targeting Tencent," said Steven Leung, executive director at UOB Kay Hian (Hong Kong) Ltd. "Tencent's overseas expansion map now looks a bit uncertain, since some M&A deals, especially if its targets are based in the US, will face challenges."

Tencent ranked as the world's biggest games publisher by revenue in 2019, according to Newzoo data. It also holds a large stake in Fortnite maker Epic Games and owns League of Legends developer Riot Games.

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