Shares in Naspers and its spinoff Prosus tumbled on Monday after a report (paywall) in the Wall Street Journal said Tencent Holdings faces a record fine in China. Prosus own 28.9% of Tencent.
According to the Journal, citing people familiar with the matter, the record fine against Tencent comes after China’s central bank discovered its WeChat Pay platform had violated anti-money laundering rules.
The People’s Bank of China found Tencent’s payments platform had allowed the transfer of funds for illicit purposes such as gambling, the newspaper reported.
WeChat Pay was also judged non-compliant with other rules that required Tencent to identify users and merchants transacting on the platform, the Journal said.
Tencent closed 9.8% lower in Hong Kong, a multi-year low and less than half its peak value reached in July 2022.
Naspers was trading down 14% at R1 542.48 at 12.32pm in Johannesburg. The share price had earlier touched an intraday low of R1 528.23, a decline on the session of 14.8%.
Prosus, which has a dual listing on the Euronext in Amsterdam and on the JSE, was also trading down more than 10% on both bourses on Monday.
The Wall Street Journal report comes as Beijing prepares to step up efforts to fight illegal fund flows, aiming to avert systemic risk and shore up the financial industry. In January, the central bank announced it will begin a nationwide campaign to clamp down on money laundering in the years to 2024.
Central bank officials, however, discovered irregularities on WeChat Pay, which competes with Ant Group’s Alipay, after concluding a routine inspection of the payments platform in late 2021, the Journal reported. Regulators are discussing the size of the impending fine but it could run to hundreds of millions of yuan, larger than typically levied in the past, it added.
Tencent’s shares closed Monday at their lowest level in almost two years. The spread for Tencent’s dollar bond due in 2030 widened by 22 basis points to 228 basis points, on pace for a record high and nearly matching Friday’s jump.
The report casts uncertainty over Tencent’s rapidly growing fintech division. WeChat Pay is at the heart of the social media giant’s businesses, helping fuel transactions within games, mini-programs like food delivery service Meituan and ride-hailing app Didi, as well as merchant payments for more than a billion consumers across the country. As of 2021, WeChat Pay handled an estimated 40% of China’s mobile payments, second only to Alipay.
Under recently established regulations, Tencent is required to restructure its fintech business under a financial holding company, much like Alibaba-founder Jack Ma’s Ant. But the connection between WeChat Pay and the rest of Tencent’s finance division could make the separation, which executives have said would have minimal impact on operations, more complicated.
Elsewhere, Tencent has been grappling with a rapidly tightening regulatory environment.
Its investment arm could be impacted as President Xi Jinping’s administration grows wary of what it deems a “disorderly expansion of capital”. WeChat has drawn scrutiny from regulators for building an enclosed Internet ecosystem that spans everything from e-commerce to short videos and online payments.
Regulators have imposed strict curbs on gaming time for minors, while halting the approval of new games in past months. And last year, the country’s technology overseer warned Internet firms to stop blocking rival services, prompting WeChat to start allowing external links to apps run by the likes of Alibaba and ByteDance. — © 2022 NewsCentral Media, with additional reporting by Zheping Huang, © 2022 Bloomberg LP