What's Up With Tencent?

I woke up Wednesday morning, and found that Tencent (TCEHF.PK), one of my positions increased about 15% in value, with absolutely no particularly relevant news that I'm aware of. Huh?

Tencent, one of the largest internet companies in China (it is listed in Hong Kong), climbed about 15% as those of us in the Western hemisphere rested our weary heads. What's going on?

Well, there are a few things that might have sparked enthusiasm for the shares - which were already, admittedly, fairly expensive:

The overall market moves in Hong Kong: The H shares as a whole (Hong Kong-listed Chinese companies) were up about 2.5%, so that might be part of it. Although the reverse could be true, Tencent's market cap is massive enough, about 12 billion now, that its move might have driven the index.

New products or developments: I didn't find any on Tuesday, but Tencent does continue to gradually build it's advertising business, and they still make tons of money from selling virtual avatar bling to their IM subscribers. They've also done little things, like make it possible for AIM subscribers to play their QQ games, and helped to integrate their payment systems and platform for buying airline tickets, but none of that is brand new, and it's not what's moving this needle today.

My best guess for the real cause for this move is...

Alibaba:Alibaba, which has been many folks' favorite Chinese company that it couldn't own for many years, is finally going public this month. This has really caused some hype in Hong Kong, since the IPO will put it in very close competition with Tencent (and Baidu, if you include stocks not listed in China) for the title of "largest market cap Chinese internet company."

Does this make any sense? Not necessarily to me, though I won't argue that Alibaba is an enticing firm. It is in entirely different businesses - not only product wise (Alibaba is basically a wholesale trade marketplace, Tencent an IM and casual games provider), but also in terms of its markets. Alibaba is focused on B2B, and Tencent is pretty strictly aimed at the mass of Chinese young adult consumers.

So maybe investors are mixing up the companies because their CEO's sound similar. Unfortunately, the fact that Jack Ma runs Alibaba, and Pony Ma runs Tencent doesn't really do much for anyone, as far as I can tell, since they are not related.

So, perhaps some explanation of this move will come out in the near future, and I'll become wiser. Maybe it was just one of those inexplicable one-day blips, which is part of the fun of investing in China, and especially of investing in Chinese companies that aren't well covered by the American press.

Full Disclosure: As of this writing I do own shares of Tencent, and LEAP options on Yahoo (which owns a big chunk of Alibaba).

Comments

[J.D]

What about advance flow from China's SWF bidding up Chinese firms listed in HK?