Tencent shares badgered by regulatory warnings, as TSMC overtakes
The Chinese internet group’s shares plunged by over 10% this week, which allowed Taiwan Semiconductor Manufacturing Company to become Asia’s most valuable company.
- Tencent (HKG: 0700) shares fell under HK$420 on Thursday (19 August 2021), a 15-month low
- Taiwan Semiconductor Manufacturing Company is now Asia’s most valuable firm
- Tencent posted a better-than-expected net profit on Wednesday
- However, its President warned that ‘more regulations should be coming’ in the near future
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Tencent stock price: what’s the latest?
Tencent shares tumbled 3.6%, a day after the group reported its second quarter results for 2021.
The internet conglomerate posted a total revenue of 138.3 billion yuan (US$21.4 billion) for the quarter, an increase of 20% over the same period a year ago.
Net profit for the three months through June came in 29% higher year-on-year at 42.6 billion yuan (US$6.6 billion), exceeding analyst estimates of 34.4 billion yuan (US$5.3 billion).
The improved earnings came mostly on the back of FinTech and Business Services, which grew by 40% year-on-year in Q2 - the most of all business segments.
Social and others advertising was next, as revenues rose by 28%, while Online Advertising increased by 23% year-on-year.
The gaming segment also continued to perform strongly despite recent controversies, with revenue jumping up 12% on the back of higher sales from games such as Honour of Kings, PUBG Mobile, Valorant, Clash of Clans and Moonlight Blade Mobile.
More crackdown coming: Tencent President
Tencent announced earlier this month that it would impose curbs on the amount of time children spend on its flagship mobile game, Honor of Kings, in response to Chinese state media Xinhua calling it ‘spiritual opium’ in an article.
That article subsequently wiped out over 10% of Tencent’s market capitalisation, with investors spooked out by the possibility of internet gaming becoming the next investigation target of Chinese authorities.
Tencent President Martin Lau then said during the group’s earnings call on Wednesday (18 August 2021) that ‘more regulations should be coming’ in the near future.
‘And I think this should be expected because the regulation has been actually quite loose over an industry like the Internet, considering its size and the importance,’ he further stated.
‘And we're seeing part of the impact this quarter and we're going to be seeing the entire impact of -- full-quarter impact next quarter,’ Lau added.
Following that, Tencent shares closed the session 1.2% lower, which was enough for it to lose its title of Asia’s most valuable firm to Taiwan Semiconductor Manufacturing Company.
What’s your view on Tencent? Take a long or short position today
Tencent shares are down 22.5% in the last one month. The stock currently has a consensus rating of ‘buy’ and price target of HK$87.09 (equating to a potential 52% upside), based on the latest analyst data published by MarketBeat.
*Based on revenue excluding FX (published financial statements, June 2020)
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