As President Trump moves to the exits, albeit in a bumpy fashion, one of his last acts before leaving office has been issuing a ban on Americans investing in 35 companies considered to have links to China’s military. The emerging market rally has largely taken that piece of news in its stride. However, Reuters report that Washington sources said Trump is considering adding Alibaba and Tencent to that list of banned firms. That’s big news.
Alibaba and Tencent have a value worth $1.3 trillion combined and are th second and third biggest EM stocks in the world held by almost every major U.S investment fund. If they are banned and $1 trillion dollars is unwound via an Alibaba and/or Tencent ban then that is big. According to UBS they think that just over one third of Alibaba’s $616 billion market is held by US investors and 12% of Tencent’s $35 billion value is. The firms combined make up around 11% of MSCI’s $7 trillion emerging market index and Chinese firms make up around 40% of that index which is up from around 17% a decade ago.
This is one area to watch as it could push some risk off selling if they are banned, so watch out for these headlines as a risk to stay on top of.