Tencent's value tumbles by $47b as WeChat ban rocks China stocks, yuan

Tencent's corporate headquarters in Shenzhen, Guangdong province. Before yesterday's drop, Tencent was worth US$686 billion, making it the world's eighth-largest company by market capitalisation.
Tencent's corporate headquarters in Shenzhen, Guangdong province. Before yesterday's drop, Tencent was worth US$686 billion, making it the world's eighth-largest company by market capitalisation.PHOTO: REUTERS

HONG KONG • The Trump administration's move to ban US residents from doing business with Tencent Holdings' WeChat app rippled through Chinese markets, erasing US$34.6 billion (S$47.3 billion) from the Internet giant's market value and sending the yuan to its biggest slump in two weeks.

President Donald Trump's executive order added to investor concern that the deteriorating US-China relationship will weigh on firms, economies and markets.

Initial confusion over the ban's scope led to volatile trading yesterday, with Tencent plunging more than 10 per cent during the morning session in Hong Kong. The stock pared losses to close down 5 per cent after a US official clarified the ban will cover only WeChat.

The vaguely worded order had triggered fears it would apply not only to Tencent's messaging and payments services in the United States but also to business relationships with some of America's largest corporations.

Tencent, ranked by Newzoo as the world's biggest games publisher by revenue last year, collaborates with US industry leaders like Activision Blizzard and Electronics Arts. It also holds a large stake in Fortnite maker Epic Games and owns League of Legends developer Riot Games.

Before yesterday's drop, Tencent was worth US$686 billion, making it the world's eighth-largest company by market capitalisation and bigger than Berkshire Hathaway.

Its huge size means it occupies a dominant position on global indexes. The firm accounts for more than 6 per cent of MSCI's developing nation gauge and 4 per cent of its Asia-Pacific measure.

Hong Kong's Hang Seng Index slumped 1.6 per cent yesterday, while the offshore yuan weakened as much as 0.45 per cent.

Mr Trump's order on WeChat came after a similar injunction against ByteDance's TikTok, the viral video service that the White House accuses of jeopardising national security.

Tencent, whose app sits at the heart of communications between people and businesses within China and abroad, is likely to face continued pressure from American policymakers, said Mr Steven Leung, executive director at UOB Kay Hian (Hong Kong).

"The US government is expected to follow up with more measures targeting Tencent," Mr Leung said.

"Tencent's overseas expansion map now looks a bit uncertain, since some M&A (mergers and acquisitions) deals, especially if its targets are based in the US, will face challenges."

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A version of this article appeared in the print edition of The Straits Times on August 08, 2020, with the headline 'Tencent's value tumbles by $47b as WeChat ban rocks China stocks, yuan'. Print Edition | Subscribe