Tencent feels the tech pinch

Chinese internet giant Tencent has tumbled 25% from its January peak, erasing about $143 billion (R1.9 trillion) of market value. That’s the biggest wipeout of shareholder wealth worldwide, as measured from the date of each stock’s 52-week high.

Facebook is the second-biggest loser with a $136 billion slump over the past three trading sessions.

Investors around the world are beginning to question whether the best days are over for technology stocks – the leaders of a nineyear boom in global equities.

Tencent, Asia’s second-largest company after ecommerce behemoth Alibaba, has also been dogged by concern that growth in its mobile-gaming unit is slowing. The stock, down 9.8% in July, capped its biggest monthly retreat since 2014.

“Investors are increasingly pricing in lower expectations for Tencent’s interim results,” said Linus Yip, a strategist at First Shanghai Securities in Hong Kong. “Overall, tech companies are facing a similar problem. They have been enjoying fast profit growth in the past few years, so it will be difficult for them to maintain similar growth in the future as the competition grows and some segments are saturated.”

Tencent’s year-on-year profit growth also slowed to 5.1% in the second quarter, the weakest pace since 2012.– Bloomberg

It will be difficult for tech companies to maintain similar growth in the future.

Linus Yip Strategist at First Shanghai Securities in Hong Kong