Chinese Tech Stocks Slump -- and Facebook and Snap Gain -- Following Trump Orders

WeChat parent Tencent and a number of other Chinese tech companies are off sharply after President Trump signed a pair of executive orders.
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A slew of Chinese tech stocks are selling off after President Trump signed executive orders targeting TikTok, WeChat and their parent companies.

On the other hand, Facebook  (FB) - Get Report and Snap  (SNAP) - Get Report are trading higher, possibly on hopes that the political pressure directed at Chinese peers will yield market share gains.

As of the time of this article, Chinese tech giant and WeChat parent Tencent  (TCEHY)  is down 7.4%, while e-commerce giant Alibaba is down 5.7%. Other Chinese tech firms seeing major declines include live-streaming service provider JOYY  (YY) - Get Report (down 14.3%), Internet services firm Sohu  (SOHU) - Get Report (down 7.0%), news app provider Qutoutiao  (QTT) - Get Report (down 7.4%), video-sharing site Bilibili  (BILI) - Get Report (down 7.5%) and top Alibaba rival JD.com (down 4.7%).

The KraneShares CSI China Internet ETF  (KWEB) - Get Report is down 5.1%. It’s still up roughly 41% on the year and 77% over the last 12 months, however.

Meanwhile, Facebook and Snap are up 0.8% and 1.6%, respectively, in spite of a 1.3% Nasdaq drop. Facebook’s gains come two days after Instagram rolled out Reels -- a short-video-sharing service that competes against TikTok in the U.S. and more than 50 other countries.

Friday’s moves follow Trump’s signing of two executive orders -- one aimed at WeChat and Tencent, the other aimed at TikTok and parent company ByteDance -- ordering U.S. companies to cease conducting any transactions with the companies in 45 days (Sept. 20), claiming their data-collection activities pose national security risks. The orders also state that after 45 days are up, the Secretary of Commerce (Wilbur Ross) will identify which transactions are subject to these restrictions.

TikTok, which recently disclosed having 100 million U.S. users, was quick to condemn the order. Among other things, the ByteDance unit asserted that it has “never shared user data with the Chinese government, nor censored content at its request,” and indicated that it’s ready to challenge Trump’s order in U.S. courts.

Should the ByteDance/TikTok order hold, it puts Microsoft  (MSFT) - Get Report on the clock to close a deal to buy all or part of TikTok. On Aug. 2, Microsoft confirmed it’s in talks to buy TikTok’s operations in the U.S., Canada, Australia and New Zealand, and that it’s aiming to conclude negotiations by Sept. 15. Yesterday, The Financial Times reported that Microsoft is now exploring a deal to buy all of TikTok from ByteDance.

For its part, the Tencent/WeChat order raises questions about the future availability of WeChat on the App Store and Google Play, both in the U.S. and elsewhere. In the U.S., WeChat is often used both by Chinese tourists and by Chinese-Americans looking to stay in touch with relatives overseas.

One other unknown: What impact the order has on Tencent’s many investments in, and partnerships with, U.S. tech companies. Among other things, Tencent has stakes in game publishers such as Activision Blizzard  (ATVI) - Get Report and Fortnite developer Epic Games, and it fully owns League of Legends developer Riot Games.

The orders have also sparked concerns about whether other platforms that are owned by Chinese companies and have meaningful U.S. user bases -- for example, Alibaba’s Alibaba.com and AliExpress international marketplaces -- could be targeted.

And with Beijing having already strongly hinted that it could retaliate if the U.S. bans TikTok or faces a sale of the platform, there’s naturally plenty of speculation right now about whether U.S. actions against ByteDance and Tencent will have repercussions for the Chinese operations of major U.S. tech companies.

Facebook and Microsoft are holdings in Jim Cramer’s Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells these stocks? Learn more now.