Tencent Holdings closed at 267 Hong Kong dollars on Thursday, tumbling for 10 consecutive days and hitting a new low in 15 months.
At the end of 2017, Tencent Holdings shot up to a market value of four trillion HK dollars. However, in 2018, Tencent fell sharply, and in less than half a year, the market value evaporated over one trillion HK dollars. In the last few months, Tencent Holdings' share price has still been in decline.
On Tuesday Tencent re-implemented the repurchase of 131,000 shares with 38.889 million Hong Kong dollars. This is Tencent's 21st trading day to buy back the company's stock yet the downward trend of the stock price has not changed.
The plunge is in some degree associated with the senior executives in the company. From October 10 to 13, 2017, Tencent's CEO Pony Ma reduced his holding of the company's six million shares for four consecutive days; on March 27, 2018, Tencent's executive director Liu Chiping reduced his holdings of one million shares at an average price of 434.36 HK dollars per share, valued at 434 million HK dollars. The stock selling by company insiders will obviously lead to the market's doubt over its growth potential.
Tencent's poor performance in the stock market, without doubt, has also close bearing on the macro economy.
Chinese government's tightened control over the game industry to a large extent has given rise to Tencent's dilemma.
As the major constituent stock for Hang Seng Index, the performance of Tencent Holdings in the stock market has always been closely related to the former, and the trend of the Hang Seng Index represents the views of domestic and foreign investors on the Chinese economy.
In the first half of 2018, trade frictions and deleveraging caused a steep drop in the Hang Seng Index. On August 2, it fell below the previous low point before marching toward the next support levels of 27,000. Overseas stocks are also in their blue days recently, especially amid the global stock tumble on Thursday, when major stock indexes worldwide all plummeted considerably.
The other two Internet giants, Alibaba and Baidu, also saw a decrease. On Eastern Standard Time Monday, Alibaba closed at 151.14 US dollars, down 28.6 percent or 211.7 US dollars compared with its peak in June, and the plunge in Baidu was 28 percent.
On the back of the Fed's rising interest rate and a weak Hong Kong stock market, new-economy firms like Xiaomi Inc and Meituan Dianping have been flocking to Hong Kong for its IPOs. However, huge amounts of financing has also created more negative effects on the market, especially for Tencent Holdings, the leader of the new-economy firms, in that multitudes of investors will sell Tencent's shares to buy others.
Both the drag on the stock market and capital distributaries fall under external factors. Tencent itself is counting more on the listing of companies to drive growth, yet e-commerce firms as Meituan Dianping and Pinduoduo on the whole have no market monopoly statue, and quite a few are far from making profits.
The same applies to the US stock market. Uncertainty looms over Tencent's five percent stake in Tesla, in that the latter is still in a huge loss.
In bid to turn the tide, Tencent on September 30 announced its first restructuring in six years, according to which its original seven business groups will be integrated into six, with two new business groups to be established.
Tencent had two major structural adjustments in 2005 and 2012 respectively, after which its share price saw a significant rise.
Besides, Tencent Music Entertainment Group on October 2 formally filed with regulators to list in the United States, under the symbol "TME". On the day after, Tencent announced it will invest 317.6 million US dollars in video-sharing website Bilibili for a 12.3-percent stake in the company.
However, judging from the market response, top priority has been given to the troubles encountered in its main business.
Previously some analysts already forecasted that Tencent Holdings would fall below the 300 HK dollar mark in the short term, and it is exactly what it claimed to be. Tencent Holdings is a large listed company with a market value at the one-trillion level, while its main business, the game industry, has taken a knock via policy adjustments, it will remain a hard task for the company to make up for the resultant loss through other businesses in the short term.