New Delhi: China’s unprecedented Chinese crackdown in the Technology industry has changed the Tencent Holdings Ltd from the dear market to the largest stock loser in the world this month.
The Chinese Internet giant has fallen 23% in July on Wednesday, set for the worst month after removing around $ 170 billion market value.
It marked the fastest evaporation from the wealth of shareholders worldwide during this period, Bloomberg data showed.
Nine of the top 10 losers in the value of shareholders this month is a Chinese company, including Meituan and Alibaba Group Holding Ltd.
Tencent shares rebounded by 7.1% on Thursday morning, tracking wider profits in Chinese stocks after Beijing revealed concerns about the private education industry.
Shenzhen-based companies are one of the main victims of official campaigns targeting several state technology giants that are considered to have a potential threat to the security of Chinese financial data and stability.
Sellloff in its shares is increasingly intensive this week after Beijing expands the crabulity of regulations to include high-flying industries as well as private education.
“I will not end regulatory crackdown.
Data security is a top priority for policy makers in the coming years.
This is normal,” said Paul Pong, Managing Director at Pegasus Fund Managers Ltd.
“Valuation must be adjusted by overcoming it, especially for technology The giant like Tencent.
“Storm regulations have resulted in punishment such as the loss of exclusive music streaming rights and anti-truster fines for Tencent.
This week, the company said it also suspended new user registration for popular Wechat services and was ordered to fix problems related to cellular applications.
Despite having concerns about further punishment measures from the regulator, the company’s shares began to look cheap and most analysts have refrained from cutting out their price targets: Among 68 analysts who have ranked on Tencent, 62 still recommends the stock as “buy.
” The average target price among analysts is HK $ 736.3, represents 65% of the premium over Wednesday’s closing HK $ 447.2, Bloomberg data shows.
On HK $ 447.2, stock traded at 22.5 times advanced profit, far below the historical average of 30 times.
It has also fallen to the most oversold level in more than six years.
“Tencent trade under HK $ 500 is interesting, but future revenues will be the main thing to watch,” said Pong, adding that if the company can achieve growth of 20% -30%, the shares can enjoy a solid rebound.
“Because it will show they can still maintain good profitability in this difficult environment.” For Citigroup analysts including Alicia Yap, every substantial share repurchase by the company can also help reverse the atmosphere of the current bad investor.
“We believe if large internet companies announce the new stock repurchase program or increase the size of the existing repurchase, it will show management trust in fundamentals and convince investors about the prospect of profit growth,” Yap and his colleagues wrote in research records.
Yep has a ‘buy’ rating on stock.