The U.S. Department of Defense decision to blacklist over 100 Chinese companies led to a sharp decline in the Hong Kong stock market on Tuesday, January 7. During trading, the Hang Seng Index, Hang Seng China Enterprises Index, and Hang Seng Tech Index all dropped by over 2%. Tencent saw a decrease of 7.28%, while Contemporary Amperex Technology (CATL) fell by 2.84% by the closing bell.
The U.S. Department of Defense announced on Monday, January 6, that Chinese companies Tencent and CATL have been added to the blacklist for their collaboration with the Chinese Communist Party’s military. The list now includes over 100 Chinese companies.
In response to the news, the stock prices of Tencent and CATL had already begun to decline before the market opened on January 7.
According to reports from the Securities Times and Leidi.com, Tencent closed at HK$379.6 per share, down by 7.28%, while CATL closed at HK$249.45 per share, down by 2.84%.
Tencent’s market value is approximately HK$3.5018 trillion. Calculated based on this, Tencent’s market cap decreased by HK$274.9 billion on the 7th.
On the evening of January 7, Tencent Holdings issued a statement asserting that the company is not a Chinese military enterprise nor involved in China’s military-civil fusion.
Additionally, documents from the Hong Kong Stock Exchange revealed that Tencent’s major shareholder, Prosus, reduced its stake in Tencent Holdings from 24.01% to 23.99% on January 6, selling approximately 367,000 shares worth about HK$150 million.
The day before, the U.S. Department of Defense stated, “Updating the list of ‘Chinese Military Companies’ under Section 1260H marks an important and ongoing effort to highlight and counter the Chinese Communist Party’s military-civil fusion strategy. China’s military-civil fusion strategy supports the modernization goals of the People’s Liberation Army (PLA) by ensuring access to advanced technology and expertise developed by Chinese companies, universities, and research projects that appear to have civilian applications. Section 1260H directs the U.S. Department of Defense to identify contributors to military-civil fusion projects that operate in or with connections to the U.S.”
Being included in such a blacklist itself does not entail specific sanctions, but it often hinders American companies from engaging in transactions with the designated entities.