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Heavyweight Chinese technology stocks Tencent Holdings Its shares fell 7% in Hong Kong after the company was added to the list of “Chinese military companies” by the US Department of Defense.
The move follows a roughly 8% drop in Tencent's American depositary receipts on Wall Street.
Other Chinese companies added to the list included a battery maker Cattlewhich is part of the supply chain of automobile manufacturers such as Ford and Tesla.
CATL shares, which were down as much as 5.6%, were last down 2.8% in Shenzhen.
The National Defense Authorization Act of 2024 states that the Department of Defense will be prohibited from purchasing goods or services directly from listed entities in June 2026, and indirectly starting in June 2027.
In response to the decision, Tencent said in a statement that its inclusion on the list was a “clear error.”
The company added: “We are not a military company or supplier. Unlike sanctions or export controls, this listing has no impact on our business.” CATL also called the designation an “error” in its response, saying it “is not involved in any military related activities.”
Evan Su, chief equity analyst at Morningstar, said Tencent has a good chance of being able to secure delisting through US courts because of the company's business model, which primarily revolves around social networking and online gaming.
The United States has targeted Chinese technology companies as it seeks to restrict the transfer of advanced technologies to China. Last year, it revoked certain licenses to sell chips to China's Huawei in May, and unveiled sweeping new export controls on critical technologies in September, including quantum computing and semiconductor goods.
In 2022, the US Department of Commerce's Bureau of Industry and Security said companies must apply for a license if they want to sell certain advanced computer semiconductors or related manufacturing equipment to China.
