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The threat of a $1 trillion United States sanctions hit on the Chinese internet giants that have led emerging market stocks to their first record high since 2007 is overshadowing the rally, just as increased scrutiny from Beijing itself squeezes valuations.
US-China tensions ratcheted up in recent days as outgoing US President Donald Trump’s administration pushed through a ban on Americans investing in 35 firms it considers to be linked to China’s military.
Sources in Washington last week said Trump was considering adding Alibaba and Tencent, worth a combined $1.3 trillion, the second and third biggest emerging-market stocks in the world and held by almost every major US investment fund, to the list of banned firms.