$143 billion of market value was wiped off the Chinese Internet giant Tencent after its shares plunged by 25 per cent from its January peak. That marked the largest wash away of shareholder wealth globally when measured from the date of each stock’s 52-week high.
The second biggest looser with a $136 billion slump over the past three trading sessions was Facebook Inc. which is the F in the FANG block of mega-cap US tech shares.
Technology stocks globally have been the driver for a nine-year boom in global equities and there are questions being raised by investors about whether the it is start of the end of the hat days for technology stocks.
Investors have also been concerned about the slowdown in growth in the mobile-gaming unit of Tencent which is the second largest company in Asia, after the e-commerce behemoth Alibaba Group Holding Ltd. The shares of the company saw a fall of 3.3 per cent on Tuesday and 9.8 per cent in July and that was the largest monthly fall for the company since 2014.
“Investors are increasingly pricing in lower expectations for Tencent’s interim results,” said Linus Yip, a strategist at First Shanghai Securities in Hong Kong. “Overall, tech companies are facing a similar problem. They have been enjoying fast profit growth in the past few years, so it will be difficult for them to maintain similar growth in the future as the competition grows and some segments are saturated.”
According to analyst estimates compiled by Bloomberg, for the second quarter, the growth in profits for Tencent year-on-year was probably slowed down to 5.1 per cent which was the poorest for the company since 2012. The share price target for Tencent was cut down by at least 11 brokerages this month which included ones like Credit Suisse Group AG and Morgan Stanley.
Despite a significant number of analysts lowering their expectations of the company, they have yet to give up on the company. There are many analysts who are also forecasting a buy recommendation on Tencent’s shares and have predicted an average price target implying a 45 per cent gain over the next 12 months.
The authenticity of their predictions and expectations would be confirmed after the second-quarter earnings announcement on 15 August by Tencent.
(Adapted form Livemint.com)