In an indication that growing U.S.-China tensions are beginning to affect international capital flows, the governor of Texas ordered state agencies to cease investing in China and sell assets there as soon as possible, citing financial and security dangers.
In a Nov. 21 letter to state agencies that was made public on his website, Republican Greg Abbott warned investors to leave China due to the “belligerent actions” of China’s ruling Communist Party.
“I give Texas investment organizations the order to refrain from using state monies for any new ventures in China. “You must sell any existing investments you may have in China as soon as possible,” he stated.
Having previously prohibited public pension funds from doing business with Wall Street companies that have adopted environmental, social, and governance principles, Texas has been adopting an increasingly activist approach in its agencies’ investments.
According to its annual report, the Teacher Retirement System of Texas, one of its state agencies, had $210.5 billion under administration as of the end of August.
In addition to listing Tencent Holdings (0700.HK) as its tenth largest position, which is valued at around $385 million at current prices, the TRS has approximately $1.4 billion in exposure to Chinese yuan and Hong Kong dollar assets.
According to Abbott’s letter, earlier this year he instructed the University of Texas/Texas A&M Investment Management Company (UTIMCO), which oversees investments totaling about $80 billion, to pull out of China.
A request for comment outside of business hours was not immediately answered by UTIMCO or Texas Teachers.
China’s markets plummeted on Friday, with the Shanghai Composite (.SSEC) opening the day 3% lower. Similar to the whole market, Tencent’s shares were down around 2% in Hong Kong afternoon trading.
Dealers claimed that although Hong Kong had seen little activity and that attitude was already low due to Chinese authorities’ unfulfilled promises of economic stimulation, the news had made them feel even more pessimistic.
Steven Leung, executive director of brokerage UOB Kay Hian in Hong Kong, stated, “Even though we all know that there will be more and more policies against China from the U.S., whenever there is any news like this, it will hit the sentiment here.”