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16/05/2024 12:08

{Market Preview}Investors can consider Tencent

[ET Net News Agency, 16 May 2024] The Hang Seng Index rose 303 points or 1.6% to 19,376
in the morning session, with a turnover of nearly HKD 114.3 billion. The Hang Seng China
Enterprises Index reported 6,864, up 122 points or 1.8%. The Hang Seng Tech Index reported
4,084, up 42 points or 1.1%.
The top three traded stocks on the HSI were Tencent (00700), Alibaba (09988), and CCB
(00939). Tencent reported HKD 397.8, up HKD 16 or 4.2%, with a turnover of HKD 15.471
billion. Alibaba reported HKD 80.65, down HKD 2 or 2.4%, with a turnover of HKD 5.257
billion. CCB reported HKD 5.84, up HKD 0.28 or 5%, with a turnover of HKD 4.426 billion.
The top three traded stocks on the Hang Seng China Enterprises Index were Tencent,
Alibaba, and CCB. The top three traded stocks on the Hang Seng Tech Index were Tencent,
Alibaba, and Meituan (03690). Meituan reported HKD 125.7, up HKD 3.8 or 3.1%, with a
turnover of HKD 2.27 billion.

"Yip Sheung Chi: HSI is expected to face resistance at 20,000"

HSI broke through the 19,300 resistance on Tuesday (14th) and rose more than 300 points
at midday, reaching a high of 19,397. Yip Sheung Chi, the Chief Strategist of First
Shanghai Securities, told ET Net News Agency that the upward momentum of HSI has slowed
down compared to before, but the overall sentiment is very positive. The continued policy
support for digesting the housing stock in the Mainland China and the expected increase in
US CPI in April, along with the anticipation of interest rate cuts, continue to support
the overall market performance.
He pointed out that under multiple positive factors, HSI has formed strong support
around 18,600 or even 19,000, and the market conditions are stabilizing. It may be
difficult for investors who intend to wait for a market correction to enter at lower
levels. He mentioned that large-cap stocks still have potential for a 5% to 8% increase,
while relatively lagging small-cap stocks can potentially achieve larger gains.
However, he emphasized that the current upward trend in the Hong Kong stock market is
strong, and HSI is already at a relatively high level. Although there is anticipation of
challenging the 20,000 level, considering the economic news, the Hong Kong stock market
has been fluctuating below 20,000 since the second half of last year when the US raised
interest rates to a high level, and there has been no interest rate cut yet. Considering
the current situation, it would be excessively optimistic for HSI to break through 20,000
in one go.

"Market is confident in Tencent's ability to sustain growth"

Tencent (00700) released its first-quarter financial results, with adjusted net profit
increasing by 54% to RMB 50.265 billion, surpassing market expectations of RMB 42.9
billion, with basic earnings per share of RMB 5.375. Overall revenue for the period
increased by 6% YoY to RMB 159.501 billion. Value-added services revenue decreased by 0.9%
YoY to RMB 78.6 billion, international game revenue increased by 3% YoY to RMB 13.6
billion, and domestic game revenue decreased by 2% YoY to RMB 34.5 billion. Online
advertising revenue surged by 26% YoY to RMB 26.5 billion, and financial technology and
enterprise services revenue increased by 7% YoY to RMB 52.3 billion.
Yip Sheung Chi agreed that Tencent's performance this quarter was impressive. In the
past, even with good financial performance, Tencent would raise concerns about whether the
growth could be sustained. However, this quarter's results have given the market enough
confidence in Tencent's ability to sustain growth, leading the stock price to break the
important psychological level of HKD 400. However, he pointed out that it is premature to
anticipate Tencent returning to HKD 500. He expects the stock to test HKD 420 in the short
term, and whether it can further break through will depend on the overall market
performance. At the current price level, investors should consider whether it is a high
chase, as buying at lower levels may no longer be feasible.

"Video streaming will continue to drive revenue growth, limited growth in the domestic
gaming market"

Tencent's revenue growth this time was driven by its online advertising business. Yip
Sheung Chi admitted that Tencent Video has been the focus of investors' attention for over
a year. In the past one to two years, due to the sluggish economic atmosphere in the
Mainland China, the advertising market was affected. However, with the economic recovery,
Tencent Video has been performing well, meeting market expectations. It is expected that
Tencent Video will continue to be the growth engine for Tencent's revenue.
As for the gaming business, Yip Sheung Chi expects this division to continue stable
growth. However, it is true that the domestic market has limited room for significant
growth. The domestic gaming market is already saturated, and in the future, it will only
face competition among existing players. On the other hand, there is still potential for
accelerated growth in the international market.

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