The American authorities are considering adding to the list of Chinese companies to be removed from Wall Street. This time, two digital giants are targeted: Tencent and Alibaba. A decision that should be weighed carefully as its market cap is $ 1.3 trillion.
The American stock market: a new protectionist playground
For a few weeks now, the United States has been laying a sword of Damocles over a few dozen Chinese companies. Continuing the struggle to throw a symbol of Chinese economic power out of the country, it was decided to ban 35 Middle Kingdom companies from the New York Stock Exchange (NYSE). Among them, the major telecommunications operators are China Mobile, China Telecom and China Unicom Hong Kong. Other companies in strategic sectors such as microprocessors, aerospace or IT were targeted.
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Given the amount of capital tied up, the NYSE has tracked the withdrawal of the three operators. Before you reverse your decision and confirm the deletion of your title from the lists. A phrase that follows “new specific guidelines” emanating directly from the United States Treasury Department.
In China, the government has evidently expressed its displeasure and raised the possibility that the United States will lose its luster in international financial markets. “I am sure that all countries, not just China, are monitoring what the United States is up to to determine whether they can be considered a reliable or trustworthy partner to work with,” a Chinese State Department spokesman said after the announcement.
Two new scapegoats
Regarding Tencent and Alibaba’s withdrawal, it’s time to think about it. These companies have been around for so long and their stocks have been preferred by a number of US mutual funds or investors. Even if they are not followed by the major Wall Street indices favored by American companies, Alibaba and Tencent remain heavyweights.
The Treasury Department must therefore carefully consider the impact of the two securities on the US financial market. Indeed, a forced sale that is too important for value or volume could shake the market.
After launching a cabal against Huawei, Trump plans to end his mandate by rubbing his shoulders with two Chinese digital giants. Earlier this month, the US government started a 45-day countdown, after which eight Chinese apps will be banned. Half of them are owned by Alibaba and Tencent, and they are mainly payment services: Alipay, QQ Wallet, WeChat Pay.
If President Trump’s 2020 was marked by his numerous protectionist measures, this trend will continue until the end of his mandate. It will now be a question of what Joe Biden will do with the relics that the outgoing president left behind. On the one hand, the US stock market could be shaken by the exit of two giants. On the other hand, the ban on eight applications must come into force ten days after its inauguration. There are two ways for the new president to use this to set the tone for his international economic policy.