Alibaba and Tencent stocks fell after a report said the Trump administration could prevent US investment in Chinese tech companies, which could escalate tensions between Washington and Beijing.

Hong Kong-listed shares of Chinese companies both fell about 4 percent on Thursday after the Wall Street Journal reported that officials were considering measures against China’s largest publicly traded company in the United States. Hong Kong’s Hang Seng Index fell 0.5 percent.

Such a move would fall under an existing blacklist of companies announced last November by order of the executive that blocked investments in 31 Chinese companies that Washington suspects may have ties to the Chinese military.

Both Alibaba and Tencent stocks fell Wednesday in New York, where the companies have combined market caps of over $ 1.3 billion. Alibaba’s 2014 US listing was the largest in history at the time.

An extension of the existing executive order to Alibaba and Tencent carries the risk of a dramatic escalation in tensions between the world’s two largest economies, which have deteriorated significantly over the past year.

If the Pentagon added the tech groups to its list of companies with alleged Chinese military connections, US President Donald Trump’s order would prevent US investors from trading their stocks 60 days after they were listed.

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Ke Yan, an analyst at GNTB Research, said it was difficult to quantify the impact this would have if Mr Trump put the ban in place. “More details are needed to assess the impact, such as the definition of US investors and the trading venue of the publicly traded public company and, most importantly, the reasons for such a ban,” he said.

The executive order, which was Mr Trump’s first major political reaction after losing the 2020 presidential election to Joe Biden, has already had an impact on US-listed Chinese companies.

On Wednesday, the New York Stock Exchange confirmed that it will delist three state-owned Chinese telecommunications companies next week: China Mobile, China Telecom and China Unicom.

The NYSE originally announced it would delist the companies on December 31, but reverse course on Monday before reverting to its previous plan later this week.

Mr Trump decided earlier this week to ban transactions involving Chinese payment requests such as Alipay and WeChat Pay, which are affiliated with Alibaba and Tencent respectively.

At the end of December, the US also announced that subsidiaries of Chinese companies would also be included in the ban.

The Trump administration also put Semiconductor Manufacturing International Corp, China’s largest chip maker and drone maker DJI, on an export blacklist that same month.

Alibaba faces challenges of its own in China, where it is facing an antitrust investigation, and as a regulator on the future of its sister company Ant Group after canceling its proposed $ 37 billion initial public offering in November.

Jack Ma, the founder of Alibaba and Ant, has not been seen publicly since late October as regulators circled his business.

Alibaba and Tencent declined to comment.

This article has been changed to reflect the length of time US President Donald Trump’s executive order would prevent US investors from trading their stocks in Alibaba and Tencent

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