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March 19, 2021

The Rise of Tencent

Tencent Holdings Ltd. has picked up several new gamers during the outbreak of the pandemic. It is the top video game publisher in the world and also the owner of WeChat. Tencent entered the arena of the large game publishers back in 2013. It has now swept past Activision and EA and is growing at a rate that western publishers can only dream of. 

Gaming is an important part of Tencent’s business. Its blockbuster games and robust advertising has driven an 89% rise in quarterly profit to the Chinese social media and gaming group.

Their flagship game, Honour of Kings, reported a record of 100 million daily active users in the first 10 months of 2020. It is the world’s largest gaming firm in terms of revenue. 

Tencent holds a strong pipeline of new games waiting to be released, including the launch of the League of Legends mobile version in Asia. 

Return to Normal Advertising

Tencent reported a return to regular advertising activity after the outbreak of the pandemic in 2020, with significant growth in sectors like internet services, education, and eCommerce.

The company’s shares closed at a 4.72% rise against a 0.22% decline in the Hang Seng index. There was a 7% drop when investors rejected shares in Chinese tech companies, after the publication of the draft of anti-monopoly rules. 

It caused hundreds of billions of dollars to be wiped off the value of technology giants like Alibaba. Martin Lau, the president of Tencent, said that the anti-trust regulation of the draft isn’t unique or new to China. He added that with tech companies growing, the new regulation is going to reflect the new reality. 

Tencent Shares Hit a 2-Year High

Tencent shares rose to a 2-year high after reporting its first-quarter earnings, which had beat expectations. Nevertheless, Hong Kong-listed shares of the company showed gains about 0.23% higher. Investors are looking ahead to Tencent’s upcoming 2020 fourth quarter and annual results announcement on 24 March, which is likely to affect its share price.

Its shares had previously hit an intra-day high of $56.67. The Coronavirus pandemic’s sweep across the world led to the company becoming the largest game marketer. Online games revenue increased 31% year-on-year to 37.3 billion Yuan in the first quarter of 2020 with a bulk of it coming off mobile games.

For those still learning how to trade shares, an alternative method of gaining exposure to Tencent stock is via a contract for difference. With a CFD, you can trade Tencent’s price movement up or down, and depending on your broker access risk management benefits like no slippage or free guaranteed stop loss to help you trade more safely. Easy Markets is one example of a broker offering these conditions.

Tencent’s fintech and business services revenue is growing as well. Its cloud and fintech services rose 24% year-over-year, accounting for about 27% of its prime line. This has marked a slowdown from the 30% growth in the second quarter of 2020 mainly due to a softer quarter. Previously, Tencent Cloud had ranked second in the cloud infrastructure market in China behind Alibaba. However, according to the latest figures from Canalys, it has dropped behind Huawei Cloud.

This slowdown has been disappointing, but it was partially offset by WeChat’s growth, along with its wealth management services. The gross margin of the segment also held steady for several years, showing it was not sacrificing its margin.

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