China stocks jumped Friday in response to news the U.S. Treasury Department left Alibaba (BABA) and Tencent Holdings (TCEHY) off a blacklist prohibiting Americans from investing in Chinese companies.
The Treasury Department on Friday issued an updated list of companies on its blacklist, which includes a number of state-run Chinese firms. Significantly, the list excluded Alibaba and Tencent. Investors feared an expansion of the list would include the two companies.
As a result, Alibaba stock jumped 4.1%, closing at 236.19 on the stock market today. Tencent stock surged 5.6% to 79.64.
In recent weeks, State and Defense Department officials have discussed expanding a blacklist of companies prohibited to U.S. investments over alleged ties to China’s military and security services, according to a Wall Street Journal report on Thursday.
The exclusion of Alibaba and Tencent “is a positive catalyst for China stocks,” said Brendan Ahern, chief investment officer at Krane Funds Advisors, in an email to Investor’s Business Daily. Krane Funds oversees the KraneShares family of Exchange Traded Funds.
More China Stocks Take Flight
A long list of other China stocks got a lift as well. These include JD.com (JD), Vipshop Holdings (VIPS), Bilibili (BILI) and Autohome (ATHM). None of them made the Treasury Department’s exclusion list.
JD stock climbed 4.1% to 91.54. Vipshop rose 3.2% to 30.01 and a record high, while Bilibili jumped 6.4% to 118.47, also a record high. In addition, Autohome leapt 6.1% to 105.05.
Also, Baidu (BIDU) soared 15.6% to 240.25. The rise in Baidu stock was fueled mostly on reports that the search-engine company is teaming up with Geely Automobile Holdings to make electric vehicles for China’s market.
Trump’s Confrontational Stance
President Donald Trump has maintained a confrontational stance on China, using a combination of sanctions, tariffs, executive orders and blacklists in hopes of winning concessions on a variety of issues, including trade and national security. The U.S. government announced its original blacklist in November with 31 companies.
Alibaba and Tencent count as China’s two most valuable publicly traded companies, with a combined market valuation of $1.3 trillion. Widely held by U.S. and global investors, the stocks weigh heavily on indexes.
“Alibaba and Tencent are well respected companies that have performed well for investors,” Ahern said. “If a ban were to be implemented I believe there would be significant pushback.”
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