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The dramatic recovery in Tencent shares has left investors wondering whether there's a hidden reason behind the stock's latest leg up. (Bloomberg)
The dramatic recovery in Tencent shares has left investors wondering whether there's a hidden reason behind the stock's latest leg up. (Bloomberg)

Tencent's sudden surge leaves traders stumped

  • Tencent shares have risen over 8% this week as Chinese investors purchased a net $304 million of shares through Hong Kong
  • Tencent Holdings has now rebounded almost 50% since its October low, including the best three-day gain since November

Hong Kong: Tencent Holdings Ltd.’s quiet recovery has turned dramatic, leaving traders to wonder whether there’s a hidden reason behind the stock’s latest leg up.

The biggest Asia-listed company has jumped more than 8% this week, its best three-day gain since November. Mainland-based investors purchased a net $304 million of the shares through trading links with Hong Kong on Monday, according to exchange data. They were also net buyers in the days before China’s regulators announced they had granted licenses to Tencent-made games on two occasions in January.

Tencent has now rebounded almost 50% since its October low, buoyed by first licences to operate new games in China after the industry was hit by a shutout last year. Bullish technical signals, improving market sentiment for Chinese shares and a wave of buying from onshore investors have also helped, as well as optimism over the profitability of one of its titles.

The speed of the recovery prompted a rare rating cut from Sinolink Securities Co.’s Pei Pei, who urged caution on the stock as Tencent is still grappling with many of the challenges that contributed to last year’s record-breaking rout. That cost investors as much as $271 billion. Tencent is due to report earnings on 21 March.

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