Hong Kong — Donald Trump’s WeChat ban targets a celebrated Chinese innovation at the heart of the world’s largest mobile gaming and social media empire, threatening one of the more eye-catching stock rallies of 2020.
Executives unfurling earnings Wednesday will seek to reassure the market it can withstand a White House campaign that’s already ensnared Huawei and dozens of Chinese up-and-comers. A US official clarified the sanction involves only the app and not its owner. But the sweeping language of Trump’s order — which bars “transactions” with the Chinese company — leaves the door open for the administration to extend it well beyond WeChat, dubbed Weixin locally.
The three most popular options as of Wednesday included a bullish contract that projected a roughly 16% rise to HK$600 by September’s end and a bearish one that suggested a 20% plunge, Bloomberg data showed. But the put-to-call ratio, or the number of traded sell options divided by the number of buy contracts, is near its lowest since May, suggesting more upbeat than bearish investors still.
Today, if the Chinese company is a mash-up of Facebook, Netflix, WhatsApp and Spotify, then WeChat is the smartphone and payments backbone that ties them all together. But the ban has wider implications. Even if the executive order doesn’t cover WeChat China, it could hamstring Tencent in other ways. Take Tencent’s $15 billion cloud services and fintech division, a major driver of growth over past years. If American firms can’t sell servers to support WeChat, that effectively means they can’t sell to Tencent itself unless the messaging service can be completely ring-fenced.
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