Tencent headquarters in the southern Chinese city of Shenzhen, in Guangdong province.
Neol Celis/AFP via Getty Images
Chinese stocks were sliding once again amid concerns that Tencent could be targeted by regulators.
Tencent (ticker: 700.Hong Kong) was sliding after an article published in a state-controlled publication accused it and other gaming companies of being “spiritual opium,” raising concerns that regulators would target it next. Shares of Tencent had dropped 6.1% at 6:19 a.m. EST.
The Shanghai Composite dropped 0.5% Monday, while Hong Kong’s Hang Seng Index fell 0.2%. U.S. exchange-traded funds devoted to Chinese stocks, however, were hit harder. The KraneShares CSI China Internet ETF (KWEB) was off 2.4% in premarket trading, while the iShares MSCI China ETF (MCHI) had declined 1%, and the iShares China Large-Cap ETF (FXI) had slipped 0.7%.
Such selling seems like an obvious reaction given the hit U.S.-listed Chinese stocks have taken in recent weeks as China cracked down on companies like Didi Global (DIDI) and moved to force for-profit education companies like Tal Education Group (TAL) and New Oriental Education & Technology Group (EDU) to become nonprofits.
Still, not everyone is as concerned. “We believe the market has over-reacted to the ‘catchy title’ article published by the Economic Information Daily on Aug. 3 calling for the strengthening control of protection to address addiction of minor users on online games.,” writes Alicia Yap, citing steps that companies like Tencent and NetEase (NTES) had already take to limit game playing by minors, among other factors. “[It] is understandable that any true or untrue news could send panic ‘sell-first’ pressure to the market. We believe certain unwarranted sell-off could enhance buying opportunity.”
In a story last month, David Semple, manager of the VanEck Emerging Markets fund (GBFAX), highlighted the fact that Tencent faces fewer competitive pressures than companies like Alibaba (BABA), and has an advantage over others in messaging and videogames, which sends users to its other businesses. Martin Lau, managing partner and a portfolio manager at FSSA Investment Managers, highlighted its CEO’s low profile, a plus given Alibaba’s troubles.
A lot of good that’s done the stock Tuesday.
Write to Ben Levisohn at [email protected]
