Tencent drops by over 50%

NASPERS AND PROSUS FOLLOW SUIT

That the Tencent share price is back at pre-pandemic levels is interesting in that its approach to HK$356 (about R663) has come from the opposite direction. Most companies report that activity and earnings have recovered from pandemic lows and investors see a recovery in share prices – but Tencent fell hard after the initial boost it got from the new trend of working and playing from home.

Tencent ran hard from around HK$320 at the end of 2019 to a high of HK$757 in February 2021 as restrictions on the movement of people fuelled internet use and, more importantly, investor expectations.

The gradual return to normal since then, as well as other challenges, has seen Tencent slump by more than 50%.

JSE heavyweights Naspers and Prosus followed. Naspers has fallen around 57% since its peak of above R3 740 in February 2021, while Prosus tumbled 60% from a high of R1 921 to the latest R776.

Tencent dropped nearly 10% in just the last few days, with the decline starting shortly before the Chinese internet giant announced a mediocre increase of 8% in revenue for the last quarter.

Ever-critical analysts quickly pointed out that revenue grew at the slowest rate since the group listed in 2004, blaming the damage on the crackdown of Chinese authorities on large tech companies’ operations.

For Tencent, one of the serious restrictions is that authorities forced the company to limit the time kids can spend playing online games. This is a serious issue if one remembers that Tencent attributed its strong revenue growth a few years ago to the fact that it produced eight of the 10 most popular online games.

The Chinese government, by way of different regulatory departments and different laws, decided that it would rather not see its youth sitting in front of cellphone and computer screens for hours on end. In addition to limiting gaming time, authorities also prohibited the launch of new games.