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Heavy blow to China's technology giant!
Chinese tech giant Tencent was added to the U.S. Department of Defense's list of Chinese military companies, causing its shares to plummet. The company, which lost 9.7% of its share value, stated that its inclusion on this list was a mistake and announced plans to discuss the matter with the U.S. Department of Defense.
A new front has opened in the'modern cold war' between China and the US, which has been ongoing, particularly through technology companies. Following moves such as the TikTok ban, export restrictions on 140 Chinese companies, and China's retaliatory export ban to the US, the US has now added Tencent, owner of leading technological applications like WeChat superapp and PUBG Mobile, to its list of military companies.
SHARP DECLINE IN SHARE VALUE
After being added to the U.S. Defense Department's list of Chinese military companies, Tencent experienced a significant drop in its shares. This development led to a rapid depreciation of Tencent's shares due to potential impacts on trade, technology, and intellectual property. The company's stock fell 9.7% after the news was announced.
The U.S. Department of Defense created this list to prevent technology use that supports China's military power. Tencent stated that its inclusion on this list was a "mistake" and responded, saying "We are not a military company." The company announced plans to take steps to be removed from this list through discussions with the U.S. Defense Department.
NEW RISK FOR CHINESE TECH GIANTS
This development emerges as a new risk factor for Chinese tech giants. While China's challenging economic conditions affect company share values, the U.S. government is trying to hinder innovation in China through high-tech export restrictions and other measures. Citigroup evaluated the drop in Tencent's shares as an attractive buying opportunity due to the company's continued leadership position in China.
Tencent maintains a dominant position as the largest gaming company in China with WeChat and other cost contributions. However, its growth rate has slowed compared to pre-pandemic periods. The company maintains its growth potential through the WeChat ecosystem and various other revenue streams.