Tencent has been struggling to make a comeback amid ongoing regulatory pressure in China and other macroeconomic factors. As a result, the downfall of the company’s stock continues.

Tencent shares hit a 5-year low

What happened?

On October 20, Tencent stock fell a little over 5% to HK$ 232.4 ($29.6) per share. According to Bloomberg, it is the lowest price since early 2017.

Analysts attribute this downfall to the latest Communist Party congress in China, where the government reaffirmed its commitment to a harsh Covid policy and delayed the release of key economic indicators.

As a result, the Nasdaq Golden Dragon China Index, which tracks Chinese tech stocks that trade in the US, fell 7% to its lowest point since 2013.

How much has Tencent lost in market value?

Tencent is not China’s most valuable company by a comfortable margin anymore, as it was recently dethroned by local liquor giant Kweichow Moutai.

The Chinese gaming giant has lost over $650 billion of its market capitalization since January 2021, when it approached the $1 trillion mark for the first time. It is now valued at $293.3 billion.

Analysts expect Tencent to report a 34% drop in net income in the latest fiscal quarter. This comes after the company’s revenue fell for the first time in its history earlier this year.

“There are no positive catalysts for Tencent in the second half [of the year], since its earnings will continue to be under pressure from the weak macro environment,” KGI Asia head of investment research Kenny Wen told Bloomberg. “And even when that improves in China, we are in an era of monetary tightening, so it will be hard to climb back to where it was when central banks were easing.”

To cope with the looming crisis, Tencent started cutting costs by closing inefficient divisions and laying off staff. On top of that, the company hasn’t seen any of its new games approved by the domestic regulator in over a year.

Tencent has also been trying to expand its business overseas by investing in more Western game studios. It also announced a new global version of Honor of Kings, which still remains the highest-grossing mobile title globally.

Got a story you'd like to share? Reach us at [email protected]