Tencent Snapped Up by China Traders After Two-Month Selloff

(Bloomberg) — Chinese investors piled back into beleaguered Tencent Holdings Ltd. in August, braving a relentless tech crackdown from Beijing that almost halved its stock price.

Traders from China bought a net HK$5.8 billion ($745 million) of the Hong Kong stock via trading links, snapping two months of outflows, according to Bloomberg calculations based on exchange data. The purchases helped the mobile gaming giant climb 0.5% in August, the first gain since April.

Beijing’s sprawling crackdown on private enterprises saw Tencent’s shares sink almost 50% from its February peak, while crimping earnings as the government sought to promote what it calls a “common prosperity” agenda. Bargain hunters have piled in as the selloff sent the company to trade at an eight-year low to its forecast earnings.

“The net buying in August was likely due to some bottom-fishing activities by long-term funds that focus on the company’s fundamentals,” said Christopher Ho, an analyst at Kgi Hong Kong Ltd.

The stock started September by rising 1.5% on Wednesday, and was one of the biggest contributers to the gains of the benchmark Hang Seng Index.

READ: Tencent Is World’s Worst Stock Bet With $170 Billion Wipeout

Still, it remains uncertain how sustainable the rebound could be as the government’s crackdown seems to be far from ending. Analysts have cut Tencent’s earnings forecast by 5% for the next 12 months on concerns there might be more regulatory limits.

The government’s latest restrictions over gaming time for children “represent another setback to the industry, potentially send another wave of negative sentiment to the market and lower investors’ overall expectations for future gaming industry growth,” Citigroup analysts including Alicia Yap wrote in Tuesday note.

(Adds Wednesday’s stock price in the fifth paragraph.)

More stories like this are available on bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2021 Bloomberg L.P.

William Murphy

William Murphy

Related post