Uh-oh. Tencent is in trouble.
The ongoing tech rout on Wall Street which manifested itself in the worst 5-day stretch of underperformance for the Nasdaq 100 versus the broader market since 2009 is weighing heavily in Asia as the Hang Seng broke below 29,000.
Leading the way was Tencent, which is now down 14% from recent highs. It was just two weeks ago when Tencent blew past Facebook in market value, making it the first Chinese tech name to join the ranks of the world’s five largest companies. At the time, it was valued at some $523 billion. Have a look:
Tuesday marked the fourth decline in five sessions. Through Friday, Tencent had erased some $55 billion in value from its November peak.
Morgan Stanley – who triggered a mini-rout in South Korea last week with a downgrade of Samsung – was out Monday recommending investors buy the dip. “Accumulate China internet giants Alibaba and Tencent after recent declines while remaining cautious on tech hardware/semiconductors bellwethers Samsung and TSMC,” Morgan’s Jonathan Garner wrote yesterday, adding that “Tencent’s decline last week was caused by misperception on potential interruption of the southbound flow.” And Garner is hardly the only analyst sticking with a bullish view. As Bloomberg notes this morning, “the slump [in Tencent] has widened the spread between its share price and analysts’ price targets to an unprecedented 19 percent.”
The weakness is bad news for the Hang Seng which fell 1% on Tuesday, resuming a slide after posting its worst 5-day stretch this year – the benchmark fell 2.7% last week:
If arbitrary round numbers are your thing, the Hang Seng has now lost two of them since breaching 30,000 for the first time since 2007 last month:
Keep an eye on this – in an increasingly interconnected and interdependent global market, these tech selloffs are demonstrating a propensity to spread quickly. And there’s some poetic justice in that, right? After all, tech is all about connecting the world.