In early 2021, Chinese online game giant Tencent almost became the second trillion-dollar company in Asia after Saudi Arabian National Petroleum Corporation. However, with Beijing’s year-long regulatory crackdown on the tech industry and dimming growth prospects, Tencent’s market value continues to shrink dramatically. As a result, its shares have plunged 64% since their peak in Hong Kong in January 2021, wiping off $623 billion in market value and setting a global record.
With the most significant loss in market value, the company ceded the throne of China’s largest company to liquor giant Kweichow Moutai.
As of the Hong Kong close on Friday, September 30, the company was valued at about $5.4 billion less than liquor giant Kweichow Moutai.
Tencent’s decline is the latest example of China’s regulatory crackdown, and bleak growth prospects are battering the country’s tech industry.
Kenny Wen is the head of investment research at KGI Asia Ltd. He said: “There are no positive catalysts for Tencent in the second half since its earnings will continue to be under pressure from the weak macro environment.
“And even when that improves in China, we are in an era of monetary tightening, so it will be hard to climb back to where it was when central banks were easing.”
The report said that Tencent’s challenges are comprehensive. Slow approval of new games by Beijing and restrictions on playtime for teenagers continued to weigh on Tencent’s profit. At the same time, Beijing’s strict “zero-COVID” policy and sporadic lockdowns hit economic growth and Tencent’s ad revenue. Besides, the U.S. Federal Reserve’s aggressive rate hikes that sparked widespread panic selling also weighed on shares.
According to Morgan Stanley, from the beginning of this year to September 20, investors have sold more than $30 billion of Tencent shares, surpassing other companies in the same industry.