Tencent’s $20 Billion Meituan Stake Cut Ignites Internet Selloff - Yahoo Finance

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(Bloomberg) -- Tencent Holdings Ltd.’s program to dole retired $20 cardinal of banal successful repast transportation elephantine Meituan triggered a wide selloff of Chinese net stocks connected Thursday.

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The benchmark Hang Seng Tech Index slid much than 5% successful hectic greeting trade. Meituan dived arsenic overmuch arsenic 6.7%, portion different Tencent investees including Kuaishou Technology and Bilibili Inc. plunged much than 7%.

Tencent pledged Wednesday to administer the bulk of its Meituan shares to investors, ramping up plans to trim its extended holdings crossed the world’s largest net industry. The determination marks a milestone successful Tencent’s improvement from a sprawling net empire with investments crossed overmuch of China’s tech sphere to a much focused gaming and societal media operator.

“Tencent’s organisation of Meituan shares could beryllium dragging sentiment arsenic marketplace worries astir further divestments from its important holdings of Chinese tech shares,” said Vey-Sern Ling, managing manager astatine Union Bancaire Privee.

Read more: Tencent to Distribute $20 Billion Meituan Stake arsenic Dividend

Tencent, which had announced plans to pare its involvement successful online retailer JD.com Inc., volition dole retired much than 958 cardinal Class B banal successful Meituan arsenic a peculiar dividend. The banal to beryllium paid out, valued astatine astir HK$155 cardinal ($19.8 billion) astatine Wednesday’s close, marks astir 91% of Tencent’s Class B stake.

The determination emerged arsenic Tencent reported gross shrank for the 2nd consecutive quarter, underscoring the grade to which China’s worsening system is hurting its mammoth backstage sector. The company’s exit from JD and present overmuch of Meituan comes aft Xi Jinping imposed a bid of withering curbs connected the manufacture successful 2021, including restrictions connected play clip and content.

The determination marks different retreat for Tencent, which on with Alibaba Group Holding Ltd. held sway implicit overmuch of China’s tech assemblage for much than a decade. Apart from JD and Meituan, Tencent besides owns portion of Didi Global Inc. And this twelvemonth it sold astir $3 cardinal worthy of shares successful Southeast Asia’s biggest net company, Sea Ltd.

Beijing has punished the country’s tech giants for anti-competitive behavior, including maintaining closed ecosystems that favour definite companies astatine the disbursal of others. The JD and Meituan dividends whitethorn bargain goodwill with the government, which has pushed for the dismantling of specified barriers and for tech firms to stock the wealth.

Chinese tech shares recovered immoderate of their losses this month, aft the Communist Party began pulling backmost from its Covid-Zero playbook and offered much incentives to the Biden medication to enactment together. Xi’s displacement connected those fronts, coupled with perceptions of a renewed absorption connected reviving the world’s No. 2 economy, is spurring speculation that Beijing volition statesman to unshackle the backstage sector.

On Wednesday, executives reassured investors that Tencent volition soon resume winning important licenses to merchandise caller large titles, reviving maturation successful home gaming. “The wide regulatory situation is trending towards a much supportive environment,” President Martin Lau told analysts connected a league call.

China’s net manufacture has made bid with a caller epoch of sedate growth, shifting absorption to enhancing profitability from chasing marketplace stock aft Beijing’s crackdown wiped much than $1 trillion disconnected their combined marketplace worth successful 2021. While regulators person eased up connected their run against tech, the once-freewheeling assemblage remains saddled by anemic user spending and strict Covid restrictions.

--With assistance from Lianting Tu.