China Techs Take Beating After Tencent Profit Shrinks

Shares of internet giant Tencent Holdings Ltd. fell 3% in morning trade in Hong Kong after the company reported a rare drop in quarterly profit, extending a slide that has wiped nearly $50 billion in market value from the company this week.

Tencent’s shares have been under pressure for most of this week, after the company was forced to pull a popular new game from its online platform just days after the title’s release. That move drew attention to a bigger regulatory freeze on approval of all new game titles in China since March, which has put a chill on the broader industry. https://www.caixinglobal.com/2018-08-14/tencent-gets-regulatory-rebuke-over-hit-game-101314962.html

The freeze’s impact was apparent in Tencent’s latest quarterly results that were released after markets closed on Wednesday. The company reported its first quarterly profit drop in more than a decade for the three months through June, as investment gains slid and the government’s scrutiny of the gaming business weighed on the company.

Tencent’s shares have now fallen about 12% this week. They are down around 30% since the start of the year, following a years-long run-up that propelled it into the world’s top 10 largest publicly traded companies in April 2017.

The sell-off dragged down many other Chinese internet stocks as well, especially ones from the entertainment space.

One of the hardest hit has been recently listed online broadcasting site Huya Inc., whose shares tumbled 6.4% on Wednesday in New York, extending a 16.1% decline the previous day. Tencent’s closest online game rival NetEase Inc. also saw its shares fall 3.6% on Wednesday, extending a 3.5% drop the previous day. Recently listed online video sites Bilibili Inc. and iQiyi Inc. fell 3.7% and 2.8%, respectively.

The sell-off also affected other non-entertainment internet companies. E-commerce giant JD.com Inc. lost 4.5% in Wednesday trade. Smaller bargain-specialist Pinduoduo Inc., which has become embroiled in a recent spate of negative news due to fake products being sold on its site, lost 6.8%.

Contact reporter Yang Ge (geyang@caixin.com)