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By Jeanny Yu
September 1, 2021

  • Mainland traders bought HK$5.8 billion worth of shares in Aug.
  • Stock traded at an eight-year low to its forecast earnings

Chinese investors piled back into beleaguered Tencent Holdings Ltd. in August, braving a relentless tech crackdown from Beijing that almost halved its stock price.

Traders from China bought a net HK$5.8 billion ($745 million) of the Hong Kong stock via trading links, snapping two months of outflows, according to Bloomberg calculations based on exchange data. The purchases helped the mobile gaming giant climb 0.5% in August, the first gain since April.

Mainland investors net bought Tencent shares in August
  

Beijing’s sprawling crackdown on private enterprises saw Tencent’s shares sink almost 50% from its February peak, while crimping earnings as the government sought to promote what it calls a “common prosperity” agenda. Bargain hunters have piled in as the selloff sent the company to trade at an eight-year low to its forecast earnings.

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“The net buying in August was likely due to some bottom-fishing activities by long-term funds that focus on the company’s fundamentals,” said Christopher Ho, an analyst at Kgi Hong Kong Ltd.

The stock started September by gaining as much as 2.8% by mid-day break on Wednesday, and was one of the best performers in the benchmark Hang Seng Index.

Still, it remains uncertain how sustainable the rebound could be as the government’s crackdown seems to be far from ending. Analysts have cut Tencent’s earnings forecast by 5% for the next 12 months on concerns there might be more regulatory limits.

The government’s latest restrictions over gaming time for children “represent another setback to the industry, potentially send another wave of negative sentiment to the market and lower investors’ overall expectations for future gaming industry growth,” Citigroup analysts including Alicia Yap wrote in Tuesday note.

— With assistance by Amy Li