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Why Tencent, Alibaba, and JD.com Stocks Dropped Today

By Joe Tenebruso – Updated Aug 7, 2020 at 7:27PM

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Tensions between the U.S. and China are rising.

What happened

Shares of Tencent (TCEHY 4.14%), Alibaba (BABA 5.33%), and JD.com (JD 4.93%) fell 7.4%, 5.1%, and 4.3%, respectively, on Friday after the U.S. government took several actions against Chinese companies. 

So what 

President Trump placed bans on popular Chinese-owned social media platforms TikTok and Tencent-owned WeChat that go into effect in roughly six weeks. The move threatens to sever ties for people who reside in the U.S. and use the apps to communicate with friends, family, and business colleagues in China. It could also damage trade relationships between the U.S. and China, making it more difficult for U.S. companies to source their products from Chinese manufacturers.

A person in a business suit holds a tablet displaying declining digital stock charts.

Chinese internet stocks declined on Friday. Image source: Getty Images.

The ban on WeChat could be particularly impactful. The app -- which also serves as a messaging and digital payments platform -- is used by more than 1 billion people around the world, many of whom reside in the U.S.

Now what 

A significant portion of Alibaba's business is derived from U.S. e-commerce companies, which purchase goods from Chinese manufacturers and resell them in the U.S. and internationally. JD.com has also taken steps to expand its partnerships with U.S. businesses in recent years, which could now come under increased scrutiny from government officials.

Tencent, of course, has the most to lose. Trump's ban on WeChat also calls into question whether Tencent will be able to continue to invest in U.S.-based companies, as it has done on numerous occasions in recent years.

For these reasons, U.S. investors should now view these Chinese internet titans as significantly riskier investments than they were just a few days ago.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd., JD.com, and Tencent Holdings. The Motley Fool has a disclosure policy.

Stocks Mentioned

Tencent Stock Quote
Tencent
TCEHY
$39.46 (4.14%) $1.57
JD.com Stock Quote
JD.com
JD
$58.61 (4.93%) $2.76
Alibaba Group Stock Quote
Alibaba Group
BABA
$90.52 (5.33%) $4.58

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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