Tencent Holdings’ quiet recovery has turned dramatic, leaving traders to wonder whether there’s a hidden reason behind the stock’s latest leg up.
The biggest Asia-listed company, in which South African technology group Naspers holds a 31.2% stake, has jumped more than 8% this week, its best three-day gain since November.
Mainland-based investors purchased a net US$304-million of the shares through trading links with Hong Kong on Monday, according to exchange data. They were also net buyers in the days before China’s regulators announced they had granted licences to Tencent-made games on two occasions in January.
Tencent has now rebounded almost 50% since its October low, buoyed by its first licences to operate new games in China after the industry was hit by a shutout last year. Bullish technical signals, improving market sentiment for Chinese shares and a wave of buying from onshore investors have also helped, as well as optimism over the profitability of one of its titles.
The speed of the recovery prompted a rare rating cut from Sinolink Securities’ Pei Pei, who urged caution on the stock as Tencent is still grappling with many of the challenges that contributed to last year’s record-breaking rout. That cost investors as much as $271-billion. Tencent is due to report earnings on 21 March. — Reported by Sofia Horta e Costa, (c) 2019 Bloomberg LP