Tencent shares fall for a fourth day, wiping out US$45.6 billion in social network’s market value

PUBLISHED : Wednesday, 15 August, 2018, 11:44am
UPDATED : Wednesday, 15 August, 2018, 5:53pm

Shares of Tencent Holdings plunged for a fourth day in Hong Kong to a 10-month low, as investors sold the stock amid concerns of tepid results when China’s biggest games publisher and social network operator publishes its second-quarter earnings.

The stock fell by as much as 3.9 per cent to HK$335, the lowest intraday level since September last year. The stock has lost 10 per cent of its capitalisation in four days of declines, wiping out HK$358 billion (US$45.6 billion) in market value since Friday.

The Shenzhen-based company may report its worst quarter in three years on Wednesday, with second-quarter net profit likely to rise by 6 per cent to 19.3 billion yuan (US$2.8 billion), according to Bloomberg’s consensus estimates. Revenue may rise 37 per cent to 77.66 billion yuan, the slowest quarterly increment since the third quarter of 2015, according to estimates.

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Tencent’s decline marks the beginning so there’s more declines to come
Ben Kwong Man-bun, KGI Asia

“Investors are selling Tencent as they expect the company’s results” to be lacklustre, said Ben Kwong Man-bun, a director of KGI Asia, who warned that as the sell-off has touched the entire technology sector, “Tencent’s decline marks the beginning so there’s more declines to come.”

The selling pressure on Tencent increased this week, after the company dropped the top-selling video game Monster Hunter: World from its WeGame platform, less than a week after its launch, in the latest case of Beijing’s tightening controls over online content.

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Tencent’s shares changed hands at a price that is lower than the targets set by 46 analysts tracking the stock, according to Bloomberg data. The company was recently trading at 33 times forward earnings, three times the average on Hong Kong’s benchmark Hang Seng Index. Selling pressure on the stock, the third-largest on the Hang Seng with a 9.25 per cent weighting, brought the index down for a fourth day on Wednesday.

“Investors have now adjusted their attitude to technology stocks, and they are now less willing to pay a premium for them,” Kwong said. “These stocks rose substantially last year on expectations of high profit growth. When they show that they can no longer deliver that growth, investors would turn away.”

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Other technology stocks are also falling. Sunny Optical Technology fell as much as 2.9 per cent, extending Tuesday’s 24 per cent slump, to an intraday low of HK$89.20.

The maker of lenses and optical products used in smartphones has fallen 30.6 per cent in four days, after posting an unexpected 1.8 per cent growth in interim income on Monday, trailing analysts’ estimates.

“A weaker yuan, the escalation of the US-China trade war, and poor economic outlook all hurt investors’ sentiment,” Kwong said. “We will see more investors selling those high-PE companies with low profit-growth potential.”