Naspers and Europe-based subsidiary Prosus shares surged more than 7% yesterday after the share price of their China investment Tencent Holdings shot up more than 10% in Hong Kong on unconfirmed reports that the country was forming a committee to “reopen” the economy after the Covid pandemic.
Naspers and Prosus’s about 29% stake in internet and entertainment giant Tencent makes up the majority of the value of their market capitalisations, while Naspers and Prosus’s large weighting in JSE indices resulted in them helping to lift the JSE All Share Index by 2% and the JSE Top 40 Index by 2.2% by midday yesterday,
Naspers and Prosus yesterday denied rumours they were selling the stake in Tencent. Naspers shares traded 8.9% higher at R2068.46 on the JSE around midday yesterday, while Prosus shares were 7.6% higher at R855.12 on the local bourse.
Similarly, the surge in other China tech stocks due to the rumoured “reopening” of China saw the Hong Kong stock exchange close yesterday 5% higher, the largest daily gain since May 2009, CNBC reported. The Hang Seng Tech Index closed 7.8% higher.
However, Chinese tech share prices, including Tencent, have some way to catch up to their recent sharp declines after the more state-control-focused Chinese President Xi Jinping began his third term as leader and packed China’s Politburo standing committee with loyalists, which the market assumed to mean that it was unlikely that harsh measures already enacted to curb the growth of tech groups in China, such as implementing curbs on for profit education and gaming, would be reversed.
Flagship Asset Management global portfolio manager Kyle Wales said they were worried about the future direction of China from an investment perspective, as no business people were appointed to within Jinping’s closest ranks of officials, which meant they could become less in touch with business and economic issues.
“He (Jinping) has placed sycophants around him,” Wales said. “We are seeing the lowest growth rates in China for many, many years... Chinese stocks are being rerated for geo-political risk,” said Wales.
A “dogged” sticking to the Covid lockdown policies in China, and a housing market crisis from over-leveraged developers, had slowed China’s economy, said Wales.
Separately, Naspers and Prosus both issued statements yesterday refuting a claim published on Monday in Asian Tech Press that a CITIC-led group (a Chinese state-owned company) was in talks to buy all of the Tencent shares owned by Naspers.
“The article is speculative and untrue. The group continues with its open-ended share repurchase programme announced in June this year, which is funded by the sale of small numbers of ordinary shares in Tencent Holdings held by the group, regularly and in an orderly manner,” Naspers said in a statement yesterday.
“The Naspers board and Prosus board reiterate their continued confidence in Tencent's long-term prospects and continue to believe that the share repurchase programme is in the best interests of Prosus, Naspers and their respective shareholders,” Naspers said.
Tencent recorded its first-ever revenue drop in the quarter ended June and analysts estimated that it was expected to report negligible sales growth and a 34% drop in net income for the full year, after online ad sales had been impacted by China’s economic slowdown, while the gaming division was facing stiffer competition.
BUSINESS REPORT