Tencent Holdings, which has lost more than a fifth of its market value in the past few months, now appears to be losing its biggest supporter: Chinese investors.

Mainland traders have sold a net HK$11.2-billion (US$1.4-billion) worth of Tencent shares so far in June, exchange data shows. This would mark the first month of outflow for the $730-billion Internet giant via the trading link with Hong Kong since May 2020.

After rising to within a whisker of joining the trillion-dollar club earlier this year, Tencent began to slip as investors grew concerned about valuations and moves by the People’s Bank of China to reign in pandemic easy-money policies. With antitrust watchdogs probing alleged monopolistic behaviour by the country’s Internet titans over the past few months, the stock is now down 23% from its January record high.

Loss of support from mainland investors, who account for almost a third of Tencent’s daily turnover, could signal that the worst is not yet over.

While the company’s sales have been boosted by increased demand for online content and services, investors have grown concerned over its profit margins due to its plans for major spending to fend off competitors such as Alibaba Group and ByteDance.

Few bright spots

“There haven’t been many bright spots in Tencent’s fundamentals,” said Dai Ming, a fund manager at Huichen Asset Management. “The advertising segment is not beating estimates, while the online gaming business may not see as high growth as last year when China recovers from the pandemic.”

Even with June’s exit, mainland investors still hold about 7% of Tencent’s stock, near the highest since at least March 2017.

“The shares won’t do well when there is lack of liquidity and earnings support,” he said. “Mainland traders’ selling of Tencent is likely to continue in the second half.” — Reported by Jeanny, (c) 2021 Bloomberg LP