I have been looking into diversifying into the Chinese market for the longest time but have been too lazy to do the homework (actually, I’m still too lazy).
Which is why I recently initiated a position in Tencent 腾讯, a no brainer tech play in the Chinese market.
To be honest, I’ve not looked at the financials of the company before pulling the trigger. I invested based purely on what I know of their business and the company’s ubiquity in China.
What does Tencent actually do?
The beauty of Chinese giants is that they practically do everything within the sector they play in. Tencent is no different. It is a tech conglomerate of sorts. Some of the products they are most known for:
- QQ – Their first product and iconic PC messaging service. You’ll probably recognise the penguin icon they use for the service.
- WeChat (微信 to the Chinese) – China’s answer to Whatsapp, LINE or whatever mobile messaging service people use. WeChat has evolved to become the platform to push Tencent’s mobile services. To the Chinese, WeChat is social network, mobile communications, gaming and electronic payments all in one app.
- Gaming – Perhaps the games they are best known for outside China is League of Legends and the Clash series of mobile games (Clash of Clans, Clash Royale). You probably thought League of Legends is made by American and Finnish developers Riot Games and Supercell respectively. Guess who owns majority stakes in both studios? This guy (as in Tencent, not me).However, in China, they have a hammerlock on the gaming and mobile gaming space. Their current claim to iOS and Andriod fame is King of Glory (王者荣耀), a League of Legends like MOBA for mobile phones. If you wish to publish games in China, it is unlikely you can do so without Tencent being involved.
Other than the obvious things you can see, Tencent is involved in all kinds of digital ventures – Entertainment, AI, Music, Banking, etc etc.
Why I bought the stock
Based on all the work travel to China I’ve been involved in this year (in fact I’m writing this article from my hotel room in China), I can see that their services have wide acceptance and appeal in China. I was looking for something that the Chinese cannot live without and this looked like a good candidate for that.
As a side point, the stock had retreated from its 52 week high by more than 10% and tested the near term support before bouncing back towards HKD400 with the overall upward trend intact. I initiated the position shortly after it tested that support.
I will look to add to if the stock retreats below my cost basis.
Thanks for reading.