Tencent gains 6pc but outlook murky

Business | Bloomberg 16 Nov 2018

Tencent (0700) was up 6 percent at HK$288 at the close in Hong Kong yesterday, leading gains on the Hang Seng Index.

But Tencent's inability to offer clarity on new game approvals took the gloss off its better-than-expected third-quarter update.

The company's management said it didn't have much of an update on the games approval process that has been at the center of the stock's more than US$230 billion (HK$1.79 trillion) loss of value since January.

JPMorgan Chase & Co has cut its price target to HK$345 from HK$400 and removed Tencent as top sector pick, as "approval suspension seems more serious than initially thought," analyst Alex Yao said.

Citigroup cut its price target to HK$392 from HK$420, since the outlook for games revenue growth remains murky as there is no sign of when approval will be resumed. Morgan Stanley cut its price target to HK$370 from HK$420 because "cautious forecasts are prudent given macro risk," according to analysts including Grace Chen.

Meanwhile, a string of Hong Kong stocks suddenly plunged yesterday with no explanation, leaving traders to speculate that a forced seller was behind the moves. More than US$1.4 billion was wiped from the value of six small-cap stocks, with Sino Haijing (1106) at one point dropping 93 percent. Traders pointed to speculation that a large holder might have been forced to liquidate shares after a loan went sour.

An employee at Sino Haijing said nobody could respond to questions, while a call to Asia Television (0707), which pared a 63 percent loss to 8.9 percent, went unanswered. "Normally when shares crash like this it's usually someone pledging a lot of shares with a broker and failing to meet margin calls," said Francis Lun, chief executive of Geo Securities. "These are small companies so it wouldn't cause that much alarm."

Spokespeople for Beijing Gas Blue Sky (6828) and AUX International (2080) couldn't be reached. Blue Sky tumbled as much as 71 percent and AUX 64 percent.

Nobody could comment at China Baoli Technologies (0164), which slid 50 percent, and Skyfame Realty (0059), which fell 72 percent.

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