Naspers, Prosus shares hit by Tencent attack
DURBAN - JSE heavyweights Naspers and Prosus shed more than 4percent and 5percent, respectively, on Friday, exposed to financial material risk via their stake in Tencent, after US President Donald Trump prohibited US residents from doing business with Chinese-owned TikTok and WeChat apps.
Naspers owns a 31percent stake in Tencent, the owner of WeChat, through its subsidiary, Prosus.
Tencent declined by 10percent and shed more than $45billion in market capitalisation in Hong Kong.
Prosus declined to R1654.69 a share on JSE on Friday afternoon, but closed 3.82percent lower at R1676.34, while Naspers fell to R13073, and closed 4.18percent down at R13462.
Both stocks have had a good run in 2020, with Naspers gaining more than 23percent since the beginning of the year, while Prosus has gained more than 35percent so far this year.
Peter Takaendesa, the head of equities at Mergence Investment Managers, said Tencent had significant direct investments in US online gaming companies, as well as business relationships with many other US businesses, which sell their content on Tencent’s platforms in China.
“This could be a material financial risk to Tencent if it is forced to exit some of those investments at valuations below their intrinsic value, but our understanding is that these investments are currently not part of the executive orders,” he said.
He said the weaker rand had been helping Naspers and Prosus to limit the loss compared to the Tencent move, but this could change at any time as daily moves in share prices were driven more by sentiment than pure fundamentals.
Takaendesa said although the technology wars could limit Tencent’s international expansion in the long run, the business remained in a strong position in China, with many growth drivers as the digital migration of many traditional industries was continuing to play in their favour.
“One has to keep in mind that global technology shares have performed very well so far in 2020 and any reactions to news flow also need to be seen in that context,” he said.
Takaendesa added that TikTok was estimated to have more than 100million users in the US and, therefore, had a meaningful direct presence.
However, WeChat had very limited direct exposure in the US and was not material to Tencent.