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Tencent to maintain aggressive investment posture in the face of the challenging 2019

HONG KONG (Reuters) – Tencent Holdings Ltd said investment is central to its overall strategy and thus maintaining the size of the investment following an aggressive 2018, brushing aside the short-term risks, such as the bursting of China’s tech bubble as the economic growth slows down.

FILE PHOTO: A sign of Tencent is seen during the fourth Internet World Conference in Wuzhen, Zhejiang province, China, Dec. 3, 2017. REUTERS/Aly Song/File Photo

In the first detailed review of investment performance, President Martin Lau also said 2018 was Tencent’s best year a record 16 companies in the portfolio went public, and had invested in more than 700 companies over the past 11 years.

The comments come as Tencent fighting investor concerns of slowing growth in the video game and social media giant’s core businesses as the government increases scrutiny of online content and services.

Speaking at a closed-door investor conference in Beijing last month, Lau said conditions in China’s internet sector are challenging and likely to worsen before there is improvement, according to a transcript of his speech reviewed by Reuters on Wednesday.

“Every time after a major crisis or bubbles, those that survive, the best companies,” Lau said. “So in my eyes, short-term pressure may intensify, but I am optimistic for the long term… Even though it is now a relatively bad time, the best time to wait then.”

Tencent was not in a position to earn money from new games due to a regulatory change for most of last year, during which time the stock lost 23 percent, or $114 billion in market value after a peak in January 2018.

China the main content of the regulator is stopped accepting new applications to earn money with video games as it processes a backlog built up during a period of nine months, a break of last year, Reuters reported on Wednesday, citing sources. The move could further delay the revival of gaming revenue growth at companies such as Tencent.

Although the decline of Tencent’s market capitalization last year was overwhelming, Lau referred to 2018 as Tencent’s best year in terms of investment, since the department was founded in 2008, under indication of the number of IPO exits. He said 63 of the companies in the portfolio over the past 11 years, and 122 “unicorns” with a value of more than $1 billion.

The market value of the companies in which Tencent has a stake of 5 percent or more, has more than $500 billion, he said. Tencent’s own market capitalisation now stands at $409 billion that the company is Asia’s second largest after New York-listed Alibaba Group Holding.

Lau rejected the criticism that Tencent had “turned into an investment bank” excellent investment than growing its core business. “The investment is an important strategy for Tencent” and allows it to concentrate on its core business, ” he said.

As such, he said Tencent “would not scale back” investments in 2019, regardless of the challenges such as the economic slowdown in China and the competition is set to increase pressure for the whole (technical) industry.”

Tencent in November, posted a better-than-expected 30 percent quarterly profit rise, as investment gains offset the effect of the freezing of the new game of the art.

It is due to report full-year profit figures on March 21.

Reporting by Sijia Jiang; Editing by Stephen Coates Cushing and Christopher

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