WeChat boom pushes Tencent shares to record high, boosting Hang Seng index

App’s monthly active users grew to 938 million in first quarter, up 23pc from last year

PUBLISHED : Monday, 22 May, 2017, 9:40am
UPDATED : Monday, 22 May, 2017, 10:50pm

Chinese online major Tencent Holdings hit a new all-time high on Monday thanks to robust growth in revenues from its popular messaging app WeChat, or Weixin as it is known in mainland China.

The rally in Tencent shares pushed Hong Kong stocks higher, with the Hang Seng Index finishing up 0.9 per cent to 25, 391.34.

Tencent shares briefly jumped by as much as 3.1 per cent to HK$276.8 (US$35.46) intra-day before paring back gains and finishing up 2.6 per cent at HK$275.4. Tencent’s market capitalisation reached HK$2.61 trillion at one point.

Several investment banks recently raised their target price for Tencent shares, after the company reported last week a 58 per cent year-on-year increase in net profit in local currency terms for the first quarter, beating market estimates.

Revenues grew 55 per cent year-on-year to 49.6 billion yuan, thanks to strong growth in the online games and advertising businesses.

In particular, advertising on WeChat helped drive revenue growth, as the app’s monthly active users (MAUs) grew to 938 million in the first quarter, up 23 per cent from the same period last year.

“After building the biggest social ecosystem in China, Tencent remains at an early stage of monetisation,” said Chi Tsang and Qin Wang, analysts for HSBC, in a recent research note.

After building the biggest social ecosystem in China, Tencent remains at an early stage of monetisation
Chi Tsang and Qin Wang, analysts for HSBC

“It is leveraging its 938 million WeChat MAUs through mobile gaming, digital content subscriptions, advertising, as well as payment.” The HSBC analysts increased their target price for Tencent to HK$290.

Goldman Sachs and Credit Suisse also upped their target prices for Tencent to HK$300 and HK$302 respectively.

On Monday, the Hang Seng China Enterprises Index, known as the H-shares index, advanced 1.0 per cent to 10,374.32.

Among other positive movers, China Life Insurance climbed 2.5 per cent to HK$24.85 while New China Life Insurance gained 3.3 per cent to HK$40.90. Index heavyweights HSBC and China Mobile rose 1.0 per cent and 0.8 per cent each, trading at HK$67.7 and HK$86.45 respectively.

However, property stocks were mixed after the Hong Kong government on Friday tightened mortgage measures for a second time in a week to cool the city’s overheating market. Analysts said the overall impact wasn’t significant because the measures were only aimed at overseas investors rather than real users, while property developers continue to offer aggressive mortgage tactics to push sales.

Shui On Land dropped 1.2 per cent to HK$1.69, New World Development fell 0.7 per cent to HK$9.66 and Sun Hung Kai Properties slipped 0.5 per cent to HK$113.80. But Cheung Kong Property Holdings was up 0.6 per cent to HK$57.6 and Chinese Estates rose 0.5 per cent to HK$12.46.

On the mainland, China’s Shanghai Composite Index dropped 0.5 per cent to 3,075.68 though the CSI300 firmed slightly, up 0.2 per cent to 3,411.24.

The Shenzhen Composite Index and the startup board ChiNext index both fell, down 1.4 per cent and 0.7 per cent respectively at 1,828.22 and 1,788.08.

Last week US stocks logged weekly losses, sparked by the political drama currently surrounding Donald Trump’s presidency.

Both the Dow Jones Industrial Average and the S&P 500 lost 0.4 per cent for the week, and the Nasdaq Composite Index fell 0.6 per cent.

Hong Kong’s Hang Seng Index nudged higher by 18 points last week, with average daily turnover reaching HK$78.1 billion.