The recent rebound in Tencent's ( $TENCENT(00700)$ ) stock, driven by the company's share repurchase program, might appear tempting at first glance. However, the implications of being added to the U.S. Department of Defense's 1260H list should not be underestimated. While Tencent is currently not on the Commerce Department's sanctions list, the possibility of it happening in the future could lead to severe consequences.
Being placed on the Commerce Department's sanctions list would mean U.S. companies would need export licenses to engage with Tencent, significantly limiting its access to crucial American technology and software. This could disrupt supply chains, increase operational costs, and potentially hinder technological innovation at Tencent.
Given Naspers' 11% share price drop following Tencent's inclusion on the military blacklist, it's clear that investor confidence can be shaken by such developments. Even though Tencent argues the listing is a mistake and plans to challenge it, the uncertainty alone can be detrimental to stock value and business operations in the long run.
Therefore, despite the current 2% rebound, caution is advised. The risk of further regulatory action from the U.S. government, coupled with the potential for more stringent sanctions, suggests it might be wise to stay away from this stock until there's more clarity on Tencent's standing with U.S. regulatory bodies. The question isn't just about catching the bottom but also about understanding the depth of the potential fall if things go south. Under HKD 400 might seem like a bargain, but the geopolitical and regulatory risks could outweigh the immediate financial allure.