TenCent takes tap

Since the 6th of March the Tencent share price has lost nearly 15% in value. Over that same period the Naspers share price has decreased 9.2%. Movements in the Rand as well as other moving parts within the Naspers group are reasons for the deviance. But why the big fall? Basically the Chinese central bank have temporarily shut down two important forms of smartphone payments which predominantly work as virtual credit cards. Apparently they do not understand the technology enough to allow it go ahead unregulated.


Tencent is hugely reliant on online payments and with over 500 million smartphone users in China online payments and retail has become a way of life. But unfortunately when you have new technologies entering the market it is understandable that it will be unregulated and needs to be approached with caution. When it comes to regulation the systems are usually reactive. Someone finds a gap, takes advantage and the regulators have to get involved. Apparently last year, Alibaba, one of Tencents biggest competitors were caught out for stretching the rules.


This begs the question about regulatory risk for companies we invest in. We avoid industries like gambling and smoking because of the regulatory risk. But what about technology? Social Media and ecommerce are still very new and are certainly subject to regulatory risk. But that is because it is new and exciting. These services make life easier and benefit mankind as a whole whereas cigarettes and gambling is a drag, lets be honest. It is regulatory risk we are willing to take.


It seems that the Chinese Central bank are just sussing things out. Yes, this has a negative impact on Tencent who have been spending hundreds of millions of Dollars on online retail which is so reliant on online payments. But the Chinese economy has evolved to the point where commerce is a way of life and I highly doubt this will have a long term effect. In fact we see this as a good buying opportunity.