Tencent's US$140b rout is world's biggest as tech sinks

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HONG KONG (July 31): If you thought the slump in US technology stocks was bad, take a look at Tencent Holdings Ltd.

The Chinese Internet giant has tumbled 25% from its January peak, erasing about US$140 billion 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 Inc, the F in the FANG block of mega-cap US tech stocks, is the second-biggest loser with a US$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 nine-year boom in global equities. Tencent, Asia’s second-largest company after e-commerce behemoth Alibaba Group Holding Ltd, has also been dogged by concern that growth in its mobile-gaming unit is slowing. The stock, down 2.7% on Tuesday and 9.2% in July, is poised for 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 probably slowed to 5.1% in the second quarter, the weakest pace since 2012, according to analyst estimates compiled by Bloomberg before the company releases results on Aug 15. At least 11 brokerages cut their Tencent share-price target this month, including Credit Suisse Group AG and Morgan Stanley.

Still, analysts haven’t turned bearish: All 51 forecasters tracked by Bloomberg have a buy recommendation on Tencent shares, with the average price target implying a 44% gain over the next 12 months.