Finweek English Edition
Tech woes continue
In 2001, Naspers* made a good investment in Chinese internet giant Tencent for $32m – becoming the largest shareholder with a 31% stake.This was Naspers’ most successful investment and appears to be the main driver of its share price.
But this investment is again suffering the wrath of China’s tech regulator, who warned firms against blocking links to rival services, reiterating Beijing’s order for online giants to pull down walls around their platforms. Prior to that, Beijing prosecutors initiated a lawsuit against a Tencent subsidiary, saying the “youth code” on the popular WeChat app does not comply with laws on protecting minors. Though Tencent announced new curbs on minors’ access to its video game Honor of Kings, it seems China is nevertheless preparing a substantial fine as part of its antitrust clampdown.
Naspers is catching the raw end of the stick and because its stake in Tencent is now worth $100bn more than its own market value, Naspers executives must also deal with the enigma of how to unlock value for its shareholders without cashing out on one of the world’s most successful tech companies. The discount continues to widen to new levels.
How to trade it:
In July I called Naspers a short below 278 825c/share because it had abandoned its primary bull trend and confirmed a negative breakout. Now the share is hovering on recently formed support at 229 085c/share, and if its three-week relative strength index (3W RSI) maintains its bear trend, further downside through that support level could trigger another sell-off towards its 2020 low at 184 380c/share. Alternatively, a recovery is possible if support is retained firmly at 229 085c and if the 3W RSI escapes its bear trend. Upside towards 312 795c/share would then be possible. ■
* finweek is a publication of Media24, a subsidiary of Naspers.