Tencent shares jump 5% after US appears to pull back from WeChat ban
Published: Aug 24, 2020 07:36 PM

China's technology giant Tencent reaches out to individuals and organizations worldwide with its telecommunication services. Photo: cnsphoto

Shares in Tencent Holdings jumped the most in two weeks on Monday after the White House appeared to back away from the WeChat ban.

The shares rose as much as 5.79 percent to close at HK$548 in Hong Kong trading on Monday after Bloomberg reported on Saturday that the Trump administration is privately seeking to reassure US companies they can continue using the messaging app in China, citing people familiar with the matter.

The move by the Trump administration - to privately allow US companies to continue to cooperate with WeChat - indicated that a crackdown on Tencent is actually hard to implement, Zhang Yi, CEO of Shenzhen-based iiMedia Research, told the Global Times on Monday.

"The ban is hard to implement. The US companies rely heavily on Chinese users and clients and have formed a deep connection with the Chinese market through WeChat. A decoupling with WeChat is not feasible or realistic," Zhang said.

The rebound gave the tech giant a market value of about HK$5.25 trillion, following weeks of dampened investor sentiment after Trump's executive order on August 6.

The executive order, which came amid efforts to crack down on Chinese-owned technology giants, banned the use of WeChat in the US by individual users, businesses and groups starting from mid-September.

As the Trump administration sought to ban WeChat, Tencent profits surged in the second quarter, helped by its gaming business.

The company's revenue rose 29 percent to 114.88 billion yuan year-on-year and revenue from the online games segment, Tencent's major source of income, surged by 40 percent, according to Tencent's earnings report released on August 12.

Following the stock rally on Monday, Cheng Wu, vice president of Tencent Group, announced that Tencent E-Sports and FC Barcelona have reached a strategic cooperation to strengthen in-depth communication in e-sports gaming, e-sports training and industrial exchanges.

Meanwhile the company is also close to taking gaming firm Leyou Technologies private in a deal that would value the latter at about $1.3 billion, media reports said on Monday.

The offer price is said to range between HK$3.30 and HK$3.40 per share and an agreement is expected as early as this week.

"The acquisition may help Tencent continue to maintain profit growth," Zhang said.

blog comments powered by Disqus