In short, Chinese officials suddenly stopped the listing of Ant Group under Jack Ma, which cast a shadow over the prospects of Alibaba. At the same time, Tencent’s strong quarterly results and the company’s comforting words about being able to cope with regulatory uncertainty have helped its stock price rise. The stock price trends of Tencent and Alibaba have attracted much attention
Chinese officials suddenly stopped the listing of Ant Group, casting a shadow over Alibaba’s prospects< /p>
"Tencent’s momentum has indeed strengthened, and its long-term growth prospects are quite promising."
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Traders who are hoping to profit from the ups and downs of Chinese Internet stocks this week (November 9 to November 15) now believe that the trend of the two top Internet stocks will show The opposite pattern. (Note: The first picture shows that Alibaba founder Jack Ma and Tencent Chairman and CEO Ma Huateng were on the same stage at a public event)
According to a report by Bloomberg News on November 13, 2020, Hong Kong stock market A combination strategy of bullish Tencent Holdings and bearish Alibaba, excluding fees and dividends, is expected to achieve a return of 13% in November. That would set a record for the highest monthly earnings since June. This so-called paired trading strategy has tied together the diametrically opposite directions of two highly correlated stocks.
Chinese officials have suddenly stopped the listing of Ant Group under Jack Ma, casting a shadow over the prospects of Alibaba. At the same time, Tencent’s strong quarterly results and the company’s comforting words about being able to cope with regulatory uncertainty have helped its stock price rise.
"Tencent's momentum has indeed increased, and its long-term growth prospects are quite promising," said Alex Wong, director of asset management at Fengsheng Capital.
This divergence in trend may seem confusing on the surface, but it is not surprising in reality. Following the release of new regulations to curb monopolistic behavior, the Chinese government's latest regulatory measures against large technology companies have been fully demonstrated this week, and the resulting sell-off has resulted in a $290 billion market value shrinkage.
After assuring analysts that the company is capable of dealing with relevant regulatory risks, Tencent’s stock price was sought after on November 13.
"From a regulatory perspective, investors’ concerns about Tencent, which has already received the attention of regulators, have now eased, while Alibaba’s regulatory attention due to Ant Group has just begun." Wong said . The author/Jeanny Yu, Alfred Liu editor/Fang Limin
Extended reading: Compared with the fanfare Ant Group Tencent’s posture is more stable
Release in China so far After the strongest signal to contain the technology giants, the share prices of Tencent Holdings, Alibaba and most Chinese Internet companies plummeted, and their total market value evaporated by US$290 billion. However, in the face of any potential regulatory rectification, Tencent has to some extent better protection than its peers.
At the November 12 performance meeting, Tencent executives will seek to strengthen their views that the company is different from Alibaba's financial technology giant Ant Group. After the Chinese authorities tighten regulations on online lending, Ant Group's initial public offering (IPO), which had set the world's highest record, was suspended. Citigroup, JP Morgan Chase and other brokerages recommend investors to buy Tencent shares on dips.
For many years, Tencent has followed with a more steadfast attitude than Ant Group, which is a big fan in the new Internet finance field, focusing on WeChat mobile payment, while ensuring that its smaller consumer loan business has enough Capital support. The regulatory rectification experienced in 2018 brought the world's largest mobile gaming empire into turmoil, and since then, stricter measures have been taken to prevent young people from becoming addicted to games. Analysts said that although WeChat is a commonly used application by Chinese people, Tencent has not yet fully monetized the potential of this service for e-commerce, finance and other adjacent businesses. Regulators may consider this. "Tencent's situation will be better, because compared with e-commerce and financial platforms, Tencent's core business, from social advertising to video games, has less relationship with the real economy and people's livelihood," said Ke Yan, an analyst at DZT Research in Singapore.
On November 10th, China’s anti-monopoly regulatory authority first issued a draft rule aimed at eliminating monopolistic behavior of domestic technology giants, involving the protection of sensitive consumer data and prohibiting giants from joining forces to exclude smaller competitors. And subsidize services at below cost to eliminate competitors. Although the new draft regulations are not specifically aimed at e-commerce operators, anti-competitive behaviors such as mandatory exclusivity and algorithm-based biased pricing are more common in this area.
Tencent’s stock price fell 7.4% in Hong Kong on November 11, and Alibaba fell 9.8%. Investors hurriedly weighed the regulatory impact.
The valuation of Tencent’s financial technology business was between US$200 billion and US$300 billion before Ant Group’s IPO was suspended. It is the closest competitor to Ant Group, but it still lags behind in certain areas. Coupled with cloud computing, financial technology and business services are Tencent's fastest-growing sectors, with revenue of nearly US$15 billion in 2019, accounting for a quarter of total revenue. Most of this comes from commercial payments promoted by WeChat. Also through WeChat, Tencent provides financial services similar to Ant Group but on a much smaller scale. There are many factors causing this situation, such as Ant Group's first mover advantage and becoming an independent company, and better control of consumer data through e-commerce transactions.
"Tencent is fortunate to take a wait-and-see attitude, let Ant Group develop and learn from their mistakes." Bloomberg industry research analyst Vey-Sern Ling said, "Wait until Ant Group jumps over all obstacles. It’s not too late for Tencent to follow suit, because they have users and payment systems."
At present, Tencent can still rely on the game as a cash cow, and the advertising business may continue to be affected by global macro Beating competitive blow. Tencent's revenue for the September quarter is expected to grow steadily by 27%, and analysts on average expect net profit to grow by 48% year-on-year. The company has benefited from the rise of online services during the COVID-19 pandemic, and it has also planned a new game lineup for next year. In October, Tencent's Riot Games Division began testing the highly anticipated mobile version of League of Legends in Asia.
Liu Chiping, President of Tencent, said at the Hong Kong Fintech Week event held earlier in November that Tencent is positioning itself as a partner and partner of the industry and other partners in Tencent’s various financial technology businesses. Promoter, not market disruptor. In this recording recorded before China announced the new online lending regulations, he added that the company worked closely with regulators and respected risk management. Author/Zheping Huang Editor/Fang Limin
THE BOTTOM LINE
In short, Chinese officials suddenly stopped the listing of Ma Yun's Ant Group, giving Alibaba a prospect Cast a shadow. At the same time, Tencent’s strong quarterly results and the company’s comforting words about being able to cope with regulatory uncertainty have helped its stock price rise.