The offerings come after investors last week bid up the share market. The Hang Seng Index rose 4.67 per cent on the week to end at 12,116.87 points while the H-share index snapped back 7.5 per cent to 4,290.26 points.

Investors in Tencent may be encouraged by the strong run of internet peer Shanda Interactive Entertainment. Earlier this month, the Shanghai-based online game operator was forced to reduce the size and price of its Nasdaq offer - despite a stellar earnings track record and its top market position.

The stock price, however, has gained 48.45 per cent since its debut. In addition, shares in online portal Tom Online have climbed 11.5 per cent over the past two weeks, while those of mobile-phone valued-added services provider Linktone have increased 12.97 per cent.

Tencent's listing is tentatively set for June 16, with book building taking place between June 7 and 10. Goldman Sachs is the lead sponsor.

ZTE directors had approved plans to sell as many as 160 million shares, or about 20 per cent of its share capital, Bloomberg reported, citing a statement made to the Shenzhen stock exchange.

The company did not say how much it aims to raise. The funds will be used for overseas expansion and product development.

Tencent, 50 per cent owned by South Africa's Naspers, commands 74.3 per cent of the market for IMS. Its QQ service allows users to communicate through the computer, mobile phone and hand-held PC.

Closest competitors MSN and Yahoo! Messenger have 11.2 per cent and 2.3 per cent shares of the Chinese market respectively, while ICQ holds just 1.9 per cent.

The Shenzhen-based company does not charge for its basic IMS but analysts believe Tencent can leverage its six-million-strong user base to sell other products.

'The market should not view it as a pure IMS provider,' DBS Vickers' Wallace Cheung said. 'It has captured a large online community to which it can easily sell related products such as mobile value-added services and online games.'

Unlike portals such as Sina.com and Sohu.com, whose customers frequently switch to competing services, users of Tencent are unlikely to defect because it would mean rebuilding their contact lists.

'Because of the contact list, the IM application can build up a community-type following and this is why the service has a very high retention rate,' Cazenove, one of the listing sponsors, said in a research report. 'Once a user builds up his contacts on a particular software platform, he is unlikely to move unless his contacts are moving.'

Tencent differentiates itself from rivals by offering unique products. Mobile chat accounted for 62.34 per cent of revenue last year. Premium instant messaging features accounted for 32.44 per cent while online advertising contributed less than 1 per cent.

Cazenove expects the company's earnings to rise 42.05 per cent to 457.7 million yuan this year. Revenue is forecast to climb to 1.13 billion yuan from 709.3 million yuan last year.

Goldman expects 1.06 billion yuan in sales and 431 million yuan in earnings this year.

With more than 300 million yuan in cash on hand, Tencent could grow revenue by acquiring leading players in related markets, Mr Cheung said.