Chinese tech stocks rise, Tencent surges on strong FY results

Thursday saw gains in the majority of Chinese technology equities, with Tencent shares rising substantially after the internet giant reported stronger-than-expected annual results. Less aggressive signals from the Federal Reserve also helped to boost mood.

Tencent Holdings Ltd. gained more than 6% to HK$368.40 per share and was poised for its best day since early March as profit declined less than anticipated in 2022 as a result of loosening COVID lockdowns in China and a laxer regulatory environment.

The largest videogame developer in the world reported a net profit attributable to shareholders of 188.24 billion yuan in 2022 ($1 = 6.8225 yuan), down 16% from the previous year but higher than Refinitiv projections of 114.19 billion yuan.

The WeChat operator reported a 1% drop in revenue for the year, marking the first time this has ever happened. The year’s long spate of COVID lockdowns had a significant negative impact on Tencent’s operations.

Beijing’s increased regulatory vigilance on the company, which was hit with many antitrust penalties and probes, was another burden.

But, with China’s rigorous zero-COVID regulation now being relaxed, the advertising sector at Tencent is thought to be well-positioned for expansion. In recent months, Beijing has also toned down its rhetoric against the country’s leading technology companies as part of efforts to support economic development following three years of COVID lockdowns.

This is expected to benefit Tencent this year, with the company also promising more cost-cutting measures and a greater focus on its core business.