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    Home » World » Tencent’s plunge reveals its Achilles heel

    Tencent’s plunge reveals its Achilles heel

    By Agency Staff11 August 2017
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    Beware of Beijing: that’s the lesson of Friday’s selloff in the shares of China’s most valuable company.

    Tencent — a stock-market favourite for its 66% surge this year — slid 4.9% in Hong Kong in its steepest drop since February 2016. South Africa’s Naspers holds a third of Tencent’s equity.

    The slump wiped US$19bn off the Internet and gaming behemoth’s market value, triggered by word of a government probe into news services run by the company as well as by Baidu and Weibo. While Tencent was already looking frothy and Thursday’s US tech selloff also dragged, the retreat shows that an offshore listing doesn’t put companies out of Beijing’s reach.

    Betting against Tencent has been a poor strategy in the past. The shares have rebounded after each selloff during its 13-year listing

    While its shares have had an almost uninterrupted rise, Tencent has been hit by the state before, falling when the People’s Daily criticised its most profitable smartphone game.

    Investors quickly got over that hurdle, though, sending shares to a record. Betting against Tencent has been a poor strategy in the past. The shares have rebounded after each selloff during its 13-year listing to make new highs, while the stock has jumped more than 500% in the past five years.

    But as the recent experiences of other non-state controlled companies like Anbang Insurance Group and Fosun International have shown, in China — the government’s interests trump those of the shareholder. As well as curbing capital outflows and debt-fueled investments, the Communist Party is increasingly tightening control over the Internet — shutting live-streaming services and repeatedly warning about the need to clean up content.

    The investigation into Tencent and its peers will see the Cyberspace Administration of China look into reports that some of the country’s largest online services are carrying user-generated content laden with “violence, porn, rumours” disruptive to social order. It didn’t specify what actions may be taken, and Tencent said it would work to remove offensive content.  — Reported by Richard Frost, (c) 2017 Bloomberg LP

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