 Bloomberg -- Donald Trumps WeChat ban targets a celebrated Chinese innovation at the heart of the worlds largest mobile gaming and social media empire, threatening one of the more eye-catching stock rallies of 2020.Its hard to overstate WeChats importance to Tencent Holdings Ltd. Its the means through which Tencent introduces a billion people to games and other online content, funneling trillions of dollars in annual payments to brands from Apple Inc. to Walmart Inc. WeChats reach underpinned Tencents 280 billion gain in market value since a March 18 Covid-19 trough -- equivalent to one Samsung Electronics Co. and the fifth biggest dollar-gain on the planet over that period.Trump single-handedly stopped that rally cold. The U.S. President signed an executive order last week to ban U.S. entities from dealing with WeChat -- along with TikTok, ByteDance Ltd.s viral video platform -- in 45 days. Confusion and uncertainty reigned as investors grappled with the vague edict. Tencent shed 66 billion over two days before it partly bounced back.Executives unfurling earnings Wednesday will seek to reassure the market it can withstand a White House campaign thats already ensnared Huawei Technologies Co. and dozens of Chinese up-and-comers. A U.S. official clarified the sanction involves only the app and not its owner. But the sweeping language of Trumps order -- which bars transactions with the Chinese company -- leaves the door open for the administration to extend it well beyond WeChat, dubbed Weixin locally.Its really a gut punch to those companies when you look at their global expansion plans, Wedbush analyst Daniel Ives told Bloomberg Television. Tencents stock stood largely unchanged ahead of the results this afternoon.Why Tencent and WeChat Are Such a Big Deal in China: QuickTakeThe WeChat operator is doing well in the short run: analysts on average foresee a 27 rise in June-quarter revenue and a 13 spike in net income. But investors appear divided over the fate of Chinas second largest corporation. Options on the company -- contracts that let the holder buy or sell stock at a pre-agreed price -- suggest traders are bracing for a 5.7 swing in Tencents shares after it unveils earnings, or roughly four times the usual band.The three most popular options as of Wednesday included a bullish contract that projected a roughly 16 rise to HK600 by Septembers end and a bearish one that suggested a 20 plunge, Bloomberg data showed. But the put-to-call ratio, or the number of traded sell options divided by the number of buy contracts, is near its lowest since May, suggesting more upbeat than bearish investors still.The widening gulf reflects the central role WeChat plays in Tencents empire, and the outsized fallout now that its in Trumps cross-hairs. Started in 2011 as a WhatsApp clone, the service has become deeply ingrained in Chinese life, indispensable to the hordes who use it to chat, shop, watch videos, play games, flirt, order food and taxis. It pioneered the all-in-one or super-app concept by embedding lite apps or mini programs -- a model emulated by Alibaba Group Holding Ltd. as well as Facebook Inc. Its success sprang in part from the fact that China banned global services such as WhatsApp, Twitter and Instagram, allowing WeChat and a host of other Chinese equivalents to flourish in an alternate internet realm.Today, if the Chinese company is a mashup of Facebook, Netflix, WhatsApp and Spotify, then WeChat is the smartphone and payments backbone that ties them all together.The impact on valuation would be more severe if the implementation included banning all transactions of Chinese businesses of U.S. companies with Tencent as a whole, as this would also hurt Weixin, advertising in mainland China by U.S. affiliated firms, the international cloud business, the international gaming business, and so on, Morningstar analyst Chelsey Tam wrote this week.At a minimum, Trumps order likely gets WeChat removed from Apple and Googles mobile stores, which in turn means suspending updates or even blacking out a service vital to communications on the factory floor, in households and the boardroom. And if American consumer giants like Starbucks Corp. and Walmart are prevented from doing business with WeChat in China, Tencent may also take a blow to advertising and e-commerce sales.But the ban has wider implications. Even if the executive order doesnt cover WeChat China, it could hamstring Tencent in other ways. Take Tencents 15 billion cloud services and fintech division, a major driver of growth over past years. If American firms cant sell servers to support WeChat, that effectively means they cant sell to Tencent itself unless the messaging service can be completely ring-fenced. Secretary of State Michael Pompeo has already urged American companies to cut ties with Chinese cloud providers including Tencent and Alibaba, part of a clean internet campaign.Read more: Trump Ban on Top Messaging App Risks Snarling Global BusinessThen theres Tencents cash cow. Gamers the world over were among the fastest and loudest opponents of the action, going online to campaign to save titles like PUBG Mobile and Call of Duty Mobile. Tencent has some 22 billion of investments in U.S. gaming assets and companies from Activision Blizzard Inc. to Fortnite maker Epic Games Inc. and League of Legends developer Riot Games Inc.What Bloomberg Intelligence SaysThe spilling over of U.S.-China tension into the software realm, marked by President Donald Trumps executive orders against Tencent and ByteDance, could increase risks for global video-game makers if business operations are forced to decouple. Tencent has at least 22 billion of gaming investments in the U.S. that, if bans widen, may face forced divestment similar to ByteDances TikTok, while Activision Blizzard risks losing 10-20 of Blizzard revenue generated in China through its partnership with NetEase.- Vey-Sern Ling and Matthew Kanterman, analystsClick here for the research.Tencent in recent years has searched for ways to extend its dominance of Chinas social media and gaming scenes internationally, with mixed success. Its smaller global exposure now becomes an edge over upstart ByteDance, whose TikTok is the first truly successful Chinese-made internet service.Now its turning inward faster than before. On Monday, Tencent kicked off a deal to merge game-streaming platforms DouYu International Holdings Ltd. and Huya Inc. into a 10 billion local leader. Last month, it offered to buy out and take private domestic search engine Sogou Inc.But Beijings own moves could complicate the matter. China has threatened to retaliate against what it perceives as rising U.S. aggression, but any attempt to undercut American operations in China could hurt Tencent and potentially complicate matters for non-U.S. players.Uncertainties still exist for Tencent and other Chinese internet companies with business in the U.S., and Chinese pure-plays will be perceived as safer by investors, Bernstein analysts including David Dai wrote in a report.Updates with Tencents shares from the fifth paragraphFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.2020 Bloomberg L.P. 