Bloomberg and Aiden He

Shares of Tencent (0700) tumbled by the most in over two months by 5.2 percent yesterday on signs that its largest shareholder Prosus may extend the selling of the Chinese tech firm's stock while AAC Technologies (2018) sank by 14.9 percent, dragging the Hang Seng Tech Index down by 1.9 percent.

The internet company's shares dropped by the most since late January to HK$357.2, after news that Prosus planned to deposit an additional 96 million shares into the city's stock clearing system, typically a precursor to selling.

Tencent's internet peers also saw shares falling, with JD.com (9618), Alibaba (9988), and Meituan (3690) all down by more than 3 percent.

"It's likely that Prosus will speed up their selling of Tencent shares when it's near the level of HK$400," said Steven Leung, an executive director at UOB Kay Hian. "Tencent has been buying back their shares to offset the market impact of big holders selling every day, but still, such negative news would always cause some concern."

Tencent repurchased 970,000 shares for a total of HK$350.67 million yesterday. It bought back 107 million shares for HK$33.8 billion last year. Still, the buybacks have done little to stem further share price declines given broader jitters about a regulatory crackdown and Covid's impact on the economy.

Though shares have slipped this week, they are still some 87 percent higher from an October low following China's reopening measures.

Prosus, an early investor in Tencent through its Cape Town-based parent Naspers, first started its campaign to pare back holdings in mid-2022 as a way to fund its own share buyback.

As of January this year, Prosus said it sold more than 193 million Tencent shares for net proceeds of US$7.2 billion (HK$56.16 billion), cutting its position to about 26.9 percent from 29 percent in June 2022.

"Tencent's share price always takes a hit when there's news of Prosus selling," said Vey-Sern Ling, managing director at Union Bancaire Privee. "But the sale doesn't affect the fundamentals of Tencent."

Meanwhile, CLSA downgraded its rating for AAC to sell and cut the target price from HK$18.8 to HK$17.3.

The investment firm said in a report that the Apple supplier's revenue and profit expectations will be negatively affected after a channel check showed Apple will drop its plan to use solid-state button design on the iPhone 15 pro models and will go back to the traditional physical button design.

The new button design was expected to be favorable for AAC but Apple cannot fix technical issues before mass production, said Ming-Chi Kuo, a well-known Apple analyst.

The tech titan’s shares fell 5.2 percent. BLOOMBERG

Tencent shivers on selling signs by stakeholder