The markets are volatile due to the ongoing geopolitical tensions and the recent interest rate hike. However, some overseas investments are gaining appeal thanks to the latest news coming out of China. For the first time in a while, companies in that market can catch their breath. There are reports that China might be easing regulations, signaling a major shift in policy. Hence, China tech stocks are making the rounds once again.
China has the world’s largest population, a rapidly growing middle class, and over 1 billion internet users. The Chinese tech sector is huge, with 301 unicorn companies (startups worth over $1 billion) and some of the most innovative companies in the world.
It’s one of the reasons for Beijing’s heavy-handed stance on the Chinese tech sector. But things are changing for the better now, and it’s not just anecdotal evidence. Amid expectations of an easing up in the restrictions by China, it seems like they’ve finally begun to ease the regulations that were put into place a few months ago. Hence, it might be why investors are looking into investing in China tech stocks.
Tencent
Tencent has businesses and investments in a wide range of internet services, and is currently the largest video game publisher worldwide.
Tencent announced Q4 results in late March. Revenue increased 8% from a year ago to $22.6 billion, its slowest quarterly growth since its IPO in 2004. Adjusted net profit declined 25% to $3.9 billion. Cash and equivalents ended the period at $44.1 billion.
Revenue for the value-added services segment increased 7% to $11.3 billion, down from 28% a year ago. The slowdown was due to sluggish growth in its domestic gaming business.
In 2021, the Chinese government imposed online video game playtime restrictions for minors and suspended the approval of new games. However, investors are now hoping the crackdown is coming to an end, and pressures on the group might decrease soon.
TCEHY stock has declined nearly 48% over the past year. Compared to its peers, shares look undervalued at 22.8x forward earnings and 5.2x trailing sales. The 12-month median price forecast for Tencent Holdings stock stands at $65.13.
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