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What Led to 7% Decline in Tencent Holdings?


Sep. 4 2018, Updated 1:09 p.m. ET

A look into Tencent’s stock price movement

Tencent Holdings (TCEHY) lost 7% on August 30 and didn’t recover the next day. The stock fell by $20 billion in response to China’s new restrictions on online gaming as a result of recurring instances of myopia. Bloomberg also reported that Donald Trump criticized the Chinese government’s yuan management and that the announced plans to impose tariffs on Chinese imports worth $200 billion after the conclusion of a public comment period on September 6.

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This news came as a massive blow to Tencent, which is already recovering from a consensus EPS and revenue miss in the second quarter of 2018. Tencent announced its quarterly results on August 15. The Chinese government suspended Tencent’s Monster Hunter: World game on August 13. Tencent Holdings is also still awaiting the green light for other games as well. The suspension and delay in the release of some of its games were the consequences of China’s severe government crackdown to curb video game addiction and violence as a result of video games.

How did other Chinese tech stocks and major indexes respond to the end of August events?

Other Chinese online gaming and Internet stocks also fell substantially. NetEase (NTES) dropped 7% on August 30. Huya (HUYA), YY (YY), iQIYI (IQ), and JD.com (JD) lost 3% on August 30. Weibo (WB) dropped 4% on the same day. Baidu (BIDU) and Alibaba Group Holding (BABA) lost 1% and 2%, respectively, on August 30.

However, NetEase rose 2% the next day as NetEase Kaola emerged as China’s leading cross-border import retail e-commerce platform according to iiMedia Research Group. The next company in the firm’s ranking included Alibaba’s Tmall Global and JD.com’s JD Worldwide, respectively. JD.com, YY, and Baidu gained 1% on August 31. Baidu was the only BAT (Baidu, Alibaba, Tencent) stock to rise on August 31. iQIYI lost 2%. However, the Nikkei 225, Shanghai, and Hang Seng indexes ended up in the red zone on August 31. However, the S&P 500 and the NASDAQ Composite indexes ended in the green.


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