China’s easing of pressure on the country’s tech companies has gone far beyond heavy-handed over the past two years. Alibaba’s fall from grace opened a front that has not yet been closed , especially for the technology and gaming segment, but now it seems more relative.
In any case, in companies like Tencent Ms Sp ADR-A , the hand of the government is still very noticeable, while the country’s president, Xi Jinping, for example, has just asked for greater supervision and security in fintech, in technology financial. Although the truth is that it is also read as less repression on companies in the sector.
But what seems to have changed the Chinese government’s attitude towards the market is that its bias on online games has changed, after giving the go-ahead to the commercialization of some in the last month. And above all, the ironclad cybersecurity investigation of the ride-sharing giant Didi is over.
This has led to a strong appreciation of Chinese stocks on Wall Street. In fact, Tencent recovers positions, more than 30% from the lows of the year marked in March, with increases of 1.64% in the last week and that are close to double digits in the last month, while maintaining slightly positive in the quarter, with gains of 18.3%.
Now Tencent’s idea, after less regulatory pressure, is to focus on future operations. In fact, he has just done an operation in which he has been described as “King Midas”. We are talking about the sale, in mid-June, of a large part of its presence in Koolearn, an online education company, which was on the verge of disappearing last summer when the government prohibited this type of for-profit educational tutoring company.
His predicament has improved so much that, on June 13, the value of his shares doubled in a single day after his push into e-commerce from his online classes went viral on social media . All this by combining e-English classes and the sale of books, smart software and learning devices.
Until now, Tencent was its second shareholder with 9.04% of its capital, which now, with that sale, which has multiplied its profit by 10 since the beginning of the month, is 1.58%. Koolearn shares are now worth half again.
As for recommendations, from TipRanks only two analysts follow the value, one who chooses to buy and the other to maintain with a target price already well below its current price, at 44 dollars, 8% below that price.
Furthermore, Tencent is already working on its strategies regarding the metaverse. We are talking about the development, it seems that in secret, of an XR unit, of extended reality, to exploit both software and hardware products that will become a reality in the metaverse. And they already dedicate more than 300 workers from their staff to this unit.
The metaverse is one of Tencent’s most important projects that consider “a totally real internet” as its CEO and founder, Pony Ma, said in 2020. According to Reuters, the unit, within its global game program, has already been working months on this project. And it contrasts with the layoffs announced last May for the reduction of the rest of the workforce. The Shenzhen-based group will cut its staff by 10-15% this year alone, concentrating on divisions like this one.
While yesterday it was known that its largest shareholder, the South African holding company Naspers, will sell part of its stake in the Chinese company to finance a share buyback program, while it wants to become the technology company of reference for foreign manufacturers in the Chinese electric vehicle market.