Followers | 689 |
Posts | 143817 |
Boards Moderated | 35 |
Alias Born | 03/10/2004 |
Sunday, November 22, 2020 6:41:18 PM
By: Motley Fool | November 22, 2020
• Investors were likely relieved after the Chinese internet giant's reassuring conference call.
Chinese tech giants took a plunge earlier this month, after the country's State Administration for Market Regulation released guidelines for new rules to limit abuses of monopolistic power.
Many Chinese tech giants have come to dominate their respective fields, and use that considerable dominance to enter new business lines and head off competition. China's regulatory body has decided to do something about it, which spells uncertainty for many of these popular stocks. The catalyst may have come from the last-minute cancellation of Ant Financial's initial public offering, which came on the heels of contentiousness between China's regulatory body and Ant and Alibaba (NYSE:BABA) founder Jack Ma.
One of those companies getting caught up in the selling was online games, social media, payments and cloud conglomerate Tencent (OTC:TCEHY). However, on its recent third quarter conference call, management sought to reassure investors on the subject of these new regulations.
The regulations appear to be skewed to other businesses
According to management, one silver lining is that the new rules appear mostly to focus on e-commerce businesses such as online marketplaces and food delivery platforms. That may affect some of Tencent's investees, but not its core online games and social media businesses.
President Martin Lau elaborated, "with respect to the different sectors, right, I can't comment fully right now, but it looks like, right, from the paper that it's more related to transaction platforms. So for games which are essentially individual products rather than platforms, I think they are less of the focus."
Some of the regulations specifically target e-commerce platforms – for instance, Alibaba – which has historically at times required certain brands to sell on it platform exclusively or lose access. Other regulations, such as the offering steep discounts on items and taking a loss in order to block out smaller competitors, are also on the table. However, these really do tend to focus on e-commerce and not digital media, which is Tencent's main focus.
Tencent is typically a good actor on these issues
Fortunately, Tencent has a history of generally being a good actor and partner to others in China. For instance, on the same conference call, one analyst noted that Tencent and rival Netease (NASDAQ:NTES) used to dominate the top 10 online games in China; however, these days, that number has diminished, with these two companies only occupying four or five slots. Chief Strategy Officer James Mitchell said:
So how we think about the market dynamic is that it's a very healthy development. Our aspiration is not domination. And while the number of studios represented in the top 10 has diversified, you can see from our results that despite that, we've been able to maintain very healthy revenue and earnings trends in our game business.
With other companies becoming more competitive in online games, Tencent's main business is likely to sidestep most anti-monopoly regulations. Clearly, the increased size and diversity of the online games business hasn't hurt Tencent much, whose online gaming revenue grew a whopping 41% last quarter.
Tencent has already made it through one regulatory firestorm and come out the other side
Speaking of online games, it should be noted that Tencent has already been through the ringer with regards to government regulation before -- in fact, in the very recent past. In early 2018, China halted all new video game approvals. There was concern about gaming addiction among China's youth, and the government reorganized its regulations and regulatory body for approving video games. New approvals were halted for almost a year, only to be resumed later in 2018, and slowly at first. But eventually, Tencent adapted to the new rules, and has obviously gone on to be quite successful in the online gaming space since then.
A scare provides an opportunity
Most of the Chinese tech stocks that declined on the regulatory news have since stabilized or recovered some of their losses. Final anti-monopoly rules have not been finalized yet, but as they come into formation, investors will be better able to choose which companies will be most affected and least-affected. My guess is that Tencent will be among those that make it through the current regulatory gauntlet relatively unscathed.
Read Full Story »»»
DiscoverGold
Information posted to this board is not meant to suggest any specific action, but to point out the technical signs that can help our readers make their own specific decisions. Caveat emptor!
• DiscoverGold
Recent TCEHY News
- Intuitive Machines Soars 18% on NASA Contract, Intel Considers Splitting Operations, Dell Reassesses Selling SecureWorks • IH Market News • 08/30/2024 10:00:08 AM
- Starbucks Rises 3%; Disney Unveils New Films and Expansions; Uber CEO Questions Tesla Robotaxi Viability, and More • IH Market News • 08/12/2024 09:46:16 AM
- TSMC July Revenue Surges 45%, Nasdaq Accelerates Penny Stock Delistings, Moody’s Downgrades Intel to BAA1, and More • IH Market News • 08/09/2024 09:44:44 AM
- Doordash and Deliveroo Terminate Talks; Universal Announces UK Theme Park Plan, and More News • IH Market News • 06/26/2024 11:08:35 AM
- Wall Street Highlights: Apple Appeals Watch Ban, Tesla to Launch Updated Model Y, and More • IH Market News • 12/27/2023 11:08:22 AM
- Correction to Global Gaming Stocks Article • Dow Jones News • 12/22/2023 12:32:00 PM
- Global Gaming Shares Dive After China Proposes Online-Gaming Curbs -- 2nd Update • Dow Jones News • 12/22/2023 12:13:00 PM
- Global Gaming Shares Fall After Draft China Rules Released -- Update • Dow Jones News • 12/22/2023 10:28:00 AM
- Moody’s Reassesses China, GitLab Exceeds Estimates, Twilio Plans Major Layoffs, and More • IH Market News • 12/05/2023 11:25:58 AM
- Canada Bans WeChat, Kaspersky Apps on Government Devices • Dow Jones News • 10/30/2023 05:12:00 PM
- Crypto This Friday: THORSwap Resumes Operations, Paolo Ardoino Takes Over as Tether CEO, and More • IH Market News • 10/13/2023 05:46:35 PM
FEATURED Cannabix Technologies and Omega Laboratories Inc. Advance Marijuana Breathalyzer Technology - Dr. Bruce Goldberger to Present at Society of Forensic Toxicologists Conference • Sep 24, 2024 8:50 AM
FEATURED Integrated Ventures, Inc Announces Strategic Partnership For GLP-1 (Semaglutide) Procurement Through MedWell USA, LLC. • Sep 24, 2024 8:45 AM
Avant Technologies Accelerates Creation of AI-Powered Platform to Revolutionize Patient Care • AVAI • Sep 24, 2024 8:00 AM
VHAI - Vocodia Partners with Leading Political Super PACs to Revolutionize Fundraising Efforts • VHAI • Sep 19, 2024 11:48 AM
Dear Cashmere Group Holding Co. AKA Swifty Global Signs Binding Letter of Intent to be Acquired by Signing Day Sports • DRCR • Sep 19, 2024 10:26 AM
HealthLynked Launches Virtual Urgent Care Through Partnership with Lyric Health. • HLYK • Sep 19, 2024 8:00 AM