Tencent stock collapses after Trump announces plan to ban WeChat in US

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Tencent shares fell as much as 10% in Hong Kong, before cutting some of those losses – even though the stock was still down nearly 6% as of early afternoon. Hong Kong’s benchmark Index Hang Seng (HSI) fell 2.3%.

The fall came after Trump issued executive orders that would ban WeChat and TikTok, the short video app owned by Beijing-based ByteDance, from operating in the United States in 45 days if not sold by their parent companies. . Trump had previously said he would ban TikTok if a deal for the app was not made with a U.S. company, but the inclusion of WeChat indicates Washington is expanding its efforts to prevent certain Chinese apps from working in the United States.

A WeChat ban would be a blow to the Chinese diaspora, students and others in the United States who rely on the app to communicate with their family, friends and business partners in China.

WeChat is the foreign version of Tencent’s hugely popular Chinese messaging app Weixin. The app provides a range of services, including instant messaging and the ability to send money to other users.

According to the order, a prohibition would apply to “any WeChat-related transaction” made by any person or “property” subject to US jurisdiction.Tencent, which did not immediately respond to a request for comment, reported in March that Weixin and WeChat had nearly 1.2 billion monthly active users. The company does not disclose the number of users by country, but industry analysts say the vast majority of them are on Weixin in China.

The wave of executive orders has “scared Asia,” Jeffrey Halley, senior market analyst for Asia-Pacific at Oanda, wrote in a note Friday.

“It highlights the challenges Chinese companies will face, emerging internationally behind the great firewall [China’s] protective cocoon, ”he added.

Trump’s ban has so far been mostly symbolic, given WeChat’s small market share in the United States.

But if it thrives in popular gaming apps operated by Tencent, it could be a problem.

More than half of Tencent’s revenue last year came from what’s known as Value Added Services (VAS), which includes the company’s lucrative online gaming portfolio. Financial services and payment apps like WeChat Pay contributed around 25% of the revenue, and just under 20% came from online advertising.

Tencent operates many popular mobile game apps, such as PlayerUnknown’s Battlegrounds or PUBG. US-based gamers spend a lot of money on PUBG – it ranked 10th in the US in consumer spending last year, according to analytics firm App Annie.

Tencent could lose the United States as a market for its mobile games if the ban on Chinese apps is extended, which appears to be the Trump administration’s intention.

US Secretary of State Mike Pompeo said on Wednesday that “unreliable Chinese apps” should be removed from US app stores. He did not give further details on how the sweeping restrictions would be implemented or whether they would require support from private companies.

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