September 18, 2020

TikTok and WeChat Blocked: Oracle Plunged

TikTok and WeChat Blocked: Oracle Plunged

China-owned social apps WeChat and TikTok have received some bad news today. The Commerce Department said on Friday that it is going to ban U.S. business transactions with WeChat and TikTok starting Sunday. President Trump will order a block on downloads of TikTok from Sunday, the Commerce Department said on Friday. 

What does this mean for the stock market, and is there an opportunity here for traders?

WeChat and TikTok Downloads Blocked 

The Commerce Secretary Wilbur Ross said that the U.S. would stop unspecified transactions that are related to WeChat and its parent company Tencent Holdings Ltd. He told Fox Business that WeChat U.S. would be closed down for all practical purposes. Americans can still use WeChat for payments in China. The basic TikTok will continue to work until Nov.12, but users won’t be able to upgrade from Sunday night. 

The U.S. Commerce Department has said today that President Trump has given a new deadline in relation to TikTok’s U.S. operation, which opposes a national threat, and this needs to be resolved by Nov.12. Trump will ban TikTok and WeChat downloads from Sunday.

Previously, President Trump stopped American firms and residents from conducting business with Tencent and TikTok via his executive order. Trump forced TikTok to sell its U.S. operation, and the deadline for this sale was Sept.15. Trump has targeted TikTok because of a national security issue, which is posed by ByteDance Ltd.’s TikTok.

Oracle and Microsoft have been the dominant contenders. Oracle took the lead, and the company’s stock has seen a serious boost. 

Stock Market 

For the U.S. stock market, this is really not good news. That’s because this has increased the tensions between the U.S. and China. We know that market participants have been sensitive to these U.S.-Sino

tensions. 

Dow Jones Industrial futures have traded mostly lower throughout this morning; however, it is likely that we may see the Dow futures snapping their two consecutive weeks of losses as investors try to bag some bargains. 

Is There an Opportunity Here?

Yes, Oracle’s stock is likely to be punished in the U.S. stock market today. Oracle’s shares have soared 14 percent in the past 52 weeks. The stock has been up approximately 5 percent in the past five days. 

With the potential U.S. ban of TikTok, companies like Facebook and Snapchat are likely to feel a lot of love in the market. Facebook’s shares traded over 2% in the U.S. premarket, and Snapchat also surged 2%.

Sell Oracle, Buy Snapchat and Facebook?

So until Nov.12, the possible trade could be to short Oracle and buy Facebook and Snap.