Picture: BLOOMBERG
Picture: BLOOMBERG

Market heavyweight Naspers experienced a severe jolt on Tuesday, falling nearly 5% at one stage, after Chinese authorities clamped down on the game-downloading activities of its 34%-held Tencent investment.

Tencent experienced its worst fall in at least six months, losing 4.13% on the day, after Chinese authorities announced their intention to limit online gaming time for under-18s.

Naspers closed 4.37% lower at R2,488, its second sharp fall in a month. It shed 5.89% on June 12 amid market jitters about the high valuations of tech stocks. Naspers traded at a price:earnings ratio of 98 on Tuesday.

BP Bernstein stockbrokers analyst Vasili Girasis said he would avoid Naspers for now, and rather focus on mining stocks on the JSE, which could benefit from a weaker rand.

Tencent earns most of its profits from game downloading. "Naspers looks dodgy at this stage," Girasis said.

Herenya Capital Advisors trader Petri Redelinghuys said Naspers’s fall on the day might have been exaggerated as the US markets were closed for Independence Day and local liquidity was low. "It could represent an opportunity to buy on the dip with limited risk as Naspers remains a favourite listing for foreign players."

Citibank recently mentioned Naspers as a favourite local investment, together with Bidvest, Nedbank and Sasol.

Some analysts in the past have warned that Naspers may face its greatest challenge from decisions emanating from the Chinese authorities, where Tencent enjoys regulatory support in a restricted market.

Tencent’s recent plans to expand into financial services were stymied by the authorities, but its WeChat services have increasingly muscled into e-commerce activities.

According to reports under-12s will be limited to one hour of online play time a day and will not be able to log on after 9pm. Those aged 12 to 18 may play at most two hours a day.

Parents have also been given access to a platform which allows them to monitor and control their child’s playing.

Tencent is the biggest game downloading company in China.

Naspers shares were already under pressure in early morning trade on Tuesday following a trading glitch on the Nasdaq on Monday, which led to wild technical gyrations in some of the "Fang" shares — Facebook, Amazon, Netflix and Google. The confusion extended to Asian trading in the morning until some calm returned.

The "Fang" shares have rocketed so far in 2017, with Naspers benefiting in tandem, but some analysts have expressed concern that a similar bubble as the dotcom crash in 2000 may be developing.

Naspers had gained nearly 40% so far this year at one point, hitting a high of R2,846.50 on May 22, but as of Tuesday was up an annual 23.5%.

The JSE all share’s overall marginal upside for 2017 so far has been driven by Naspers, British American Tobacco and Richemont, which have rallied in line with global markets. Both financials and resources are negative year-to-date.

Stanlib retail investment director Paul Hansen said a weaker rand should benefit Naspers’ performance on the JSE for the year going ahead, in line with other rand hedges such as Richemont. "In the quarter to end-June Naspers gained 9.9%."

Naspers makes up about 16% of the all share’s R13.7-trillion market value.

Please login or register to comment.