Tencent shares enjoy biggest rise since 2015 after better-than-expected results

Internet giant finished Thursday 3.74 per cent higher at HK$411, having surged 7 per cent earlier in the session

PUBLISHED : Thursday, 17 May, 2018, 10:03am
UPDATED : Thursday, 17 May, 2018, 6:02pm

Shares in internet giant Tencent Holdings jumped on Thursday after the company posted better-than-expected first quarter earnings.

Tencent finished the day 3.74 per cent higher at HK$411 after surging as much as 7.07 per cent in its biggest daily rise since August 2015.

Deutsche Bank lifted the Shenzhen-based firm’s target price from HK$412 to HK$481 citing the fact the impressive results were not only down to strength in mobile games but also because management had continued to focus on longer-term initiatives, such as mini programs, short video clips, live streaming, and mobile payments.

Tencent had also entered into an agreement with infrastructure firm China Communications Construction to collaborate on connection, data, and integrating digital information technology to help build China’s communications infrastructure under the Belt and Road initiative, according to China Communications’ website.

Hong Kong-listed China Communications ended flat at HK$8.62 on Thursday, halting two days of declines.

After the market closed on Wednesday, Tencent, China’s largest social network operator and video games company announced profits had risen 61 per cent because of a strong contribution from its mobile games and online advertising businesses.

Net income was 23.29 billion yuan (US$3.65 billion) in the quarter ending March 31, beating average market expectations by around 30 per cent.

Revenue reached 73.53 billion yuan, up 48 per cent from the same time last year, driven by online advertising, online games and messaging services. The Hong Kong-listed company reported an operating margin of 42 per cent, up 3 percentage points from the same period a year ago.

In response, Tencent’s ADR soared 6.83 per cent higher in New York on Wednesday to HK$422.29 after conversion from US dollars.

Investors had been cautious earlier in the week following disappointing first-quarter results from AAC Technologies Holdings, with Apple supply-chain stocks down about 22 per cent since the launches of the iPhone 8 and iPhone X, making it one of the worst-performing sub-sectors in Asian technology.

In a reflection that fragile sentiment remains, both Hong Kong and mainland markets dropped on Thursday as the US and China started a second round of trade negotiations in Washington a day after North Korea threatened to pull out of a highly-anticipated summit with Donald Trump.

The Hang Seng Index slid 0.54 per cent or 168.05 points to 30,942.15 and the Hang Seng China Enterprises index lost 1.30 per cent or 161.69 points to 12,278.43.