Tencent stock drops following US Defense Department designation

Investing.com -- Shares of Tencent Holdings (OTC:TCEHY ) Limited (HKEX:0700) fell 6.4% after the company, along with several others including Contemporary Amperex Technology Co., Ltd. and Autel Robotics Co., Ltd., was designated as a "Chinese military company operating in the United States" by the US Defense Department. This announcement was made in a Federal Register filing by the Office of the Under Secretary of Defense (Acquisition and Sustainment), Department of Defense.

The Deputy Secretary of Defense has determined that these entities qualify as "Chinese military companies" under the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021. This determination requires the Secretary of Defense to identify and publish a list of such companies annually until December 31, 2030. The intent behind the designation is to highlight companies that are believed to be affiliated with or supportive of the Chinese military.

The listing in the Federal Register does not provide specific details on the implications of this designation for Tencent or the other companies mentioned. However, historically, companies identified under this category have faced increased scrutiny and potential restrictions from the US government, which can affect their business operations and investor sentiment.

The market's reaction to Tencent's stock reflects concerns over the potential impact of this designation on the company's business prospects in the US. The label of a "Chinese military company" carries with it not only reputational risks but also the possibility of sanctions or other measures that could hinder Tencent's activities in the US market.

As of now, there has been no official statement from Tencent regarding the designation or its plans to address the concerns raised by the US Defense Department's announcement. Investors and analysts will likely be watching closely for any further developments that could clarify the situation or outline the company's response.

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Source: Investing.com