Mainland China surges while Hong Kong and the Philippines struggle
- On January 6, 2025, the U.S. Department of Defense added CATL and Tencent to its Blacklist, leading to significant stock price declines.
- The blacklist indicates the companies cannot do business with the Department but does not enact an investment ban yet.
- The fate of these companies, amid ongoing geopolitical tensions, raises concerns but retains possibilities for future investment.
On Monday, January 6, 2025, the U.S. Department of Defense implemented restrictions by adding battery manufacturer Contemporary Amperex Technology Co. Limited (CATL) and internet giant Tencent to its Blacklist. This move prompted a notable decline in the stock prices of both companies. Tencent fell by 7.28% in Hong Kong, while CATL experienced a lesser drop of 2.84% in Mainland China, indicating varying reactions to such foreign news across different markets. These companies lack sponsored American Depositary Receipts (ADRs), and although Tencent has unsponsored ADRs, these also dropped over 6% in the U.S. on the same day. This blacklist serves not as an outright investment ban, rather it delineates companies the Department cannot engage in business with. Historically, these designations can lead to increased scrutiny from investors and potential repercussions for international trade and investment relations. An executive order would be necessary to enforce any formal investment restrictions on these companies, a step that has not yet been taken, suggesting that for now, U.S. investors can still engage with the companies in question without limitations. While this move by the Defense Department has stirred apprehension among investors, it is crucial to note that the added companies believe their operations remain unaffected. Sense Time, a camera security company already on the list but already restricted for U.S. investors since a previous Trump Executive Order, stated that their business continues as normal. Meanwhile, various sectors in the Asia-Pacific region performed poorly amidst this announcement, with Communication Services, Information Technology, and Health Care showing significant declines. Despite these fluctuations, there remains optimism regarding the market outlook and potential shifts in policy under different U.S. administrations, particularly as analysts speculate about the future approach towards China. Furthermore, amidst challenges faced by tech companies, China's E-Commerce sector is booming, with live streaming accounting for substantial growth according to recent reports, underscoring the contrast in market dynamics within the region.