Tencent Divestment Sends Chinese language Web Shares Tumbling

Tencent’s personal shares fell 4.3% Wednesday. Its market capitalization has declined by greater than 1 / 4 over the previous 12 months to about $530 billion.

The broader Hold Seng Index ended 1.6% decrease, after Hong Kong’s authorities reintroduced tighter social-distancing measures and stated it could impose a two-week ban on passenger flights from eight international locations. Some latest arrivals to the Asian monetary hub have examined constructive for the extremely infectious Omicron Covid-19 variant, and the town has recognized a small variety of native instances.

The day prior to this, Tencent bought a 2.3% stake and diminished its voting rights in Southeast Asian e-commerce and videogaming firm Sea Ltd. It had beforehand owned greater than a fifth of the New York-listed agency, whose shares have multiplied in worth because the begin of the pandemic.

The sale befell simply two weeks after the Chinese language social-media and videogaming large stated it could divest itself of the majority of its shares in web retailer

JD.com Inc.

The occasions sparked worries amongst buyers that China’s most respected firm might pare stakes it holds in different U.S.- or Hong Kong-listed firms.

“Tencent is feeling the strain to cut back lots of the holdings within the platform firms to keep away from the looks of [an] web, on-line monopoly,” stated Hao Hong, head of analysis and chief strategist at Bocom Worldwide. The probability {that a} key shareholder in lots of firms might cut back its stakes has created promoting strain throughout many shares, he stated.

The American depositary receipts of

Pinduoduo Inc.,

one other Chinese language on-line retailer that counts Tencent as a shareholder, tumbled 11% in U.S. buying and selling Tuesday, whereas these of streaming-music platform

Tencent Music Leisure Group

fell round 6%.

The broad selloff was largely triggered by Tencent’s sale, which suggests extra divestments could possibly be in retailer, stated Chun Sung Oong, an web analyst at brokerage UOB Kay Hian, who added that buyers could possibly be higher off avoiding shares of firms wherein Tencent has invested.

Tencent, identified for its ubiquitous WeChat app, has invested in a whole bunch of up-and-coming companies, betting extensively on Chinese language and abroad startups in areas equivalent to gaming, social media, leisure and electrical automobiles.

The Shenzhen-headquartered agency nonetheless has vital stakes in lots of listed firms, however a big selloff in Chinese language web shares over the previous yr has lowered the worth of its large funding portfolio. Tencent has stated it could keep enterprise relationships with each Sea and JD.com regardless of the disposal of elements of its stakes.

China’s prime market regulator, the State Administration for Market Regulation, on Wednesday individually stated it discovered antitrust violations in additional than a dozen previous acquisitions or three way partnership offers involving Tencent,

Alibaba Group Holding Ltd.

, JD.com or

Bilibili Inc.

The regulator stated it fined the businesses 500,000 yuan, equal to just about $79,000, for every violation. 9 of them are associated to Tencent.

Whereas the fines weren’t giant, they confirmed Beijing continues to be attempting to rein within the nation’s internet-technology sector following greater than a yr of regulatory actions which have included monetary penalties and calls for for a lot of giant firms to serve public pursuits higher. Chinese language regulators earlier this week handed a number of recent guidelines for expertise firms, overlaying their use of algorithms in addition to cybersecurity opinions they have to undergo in the event that they need to checklist abroad.

Additionally on Wednesday, the Our on-line world Administration of China proposed a spread of revisions to its regulation of cellular apps, and stated some operators must bear safety opinions earlier than introducing new options or applied sciences that would affect public opinion or mobilize society.

Mr. Oong of UOB Kay Hian stated he expects the cybersecurity regulatory panorama in China to stay strict within the close to time period. “I don’t assume Beijing’s tech crackdown will decelerate anytime quickly,” he added.

—Anniek Bao contributed to this text.

Write to Dave Sebastian at dave.sebastian@wsj.com