Naspers’ valuation fell by more than Aspen Pharmacare’s entire market capitalisation on Wednesday after its main asset, Hong Kong-listed Tencent, reported a surprise decline in earnings.

The Naspers decline dragged the JSE all share index down as much as 3.4%, since the company accounts for about a fifth of the local bourse.

Analysts said this highlights the risk of tracking the all share index as it is heavily skewed towards a single stock.

The share price of Africa’s biggest company closed 8.2% lower at R3,060.88, erasing R121bn from its market value. Aspen, the JSE’s 20th-largest stock, is worth R117bn.

Chinese internet giant Tencent, 31% owned by Naspers, said on Wednesday its net profit in the second quarter ended June was 2% lower than a year before – its first profit drop in more than a decade.

And while revenue climbed 30% to 73.68bn yuan (R155.5bn), New Street Research said that this number is about 8% lower than it expected.

The earnings decline was partly due to a freeze on gaming licence approvals in China, which resulted in the “nonmonetisation of popular tactical tournament games”, Tencent said. Earlier in August, Tencent was forced to pull a popular online game called Monster Hunter: World from its WeGame platform after it was blocked by authorities.

Despite these headwinds, the analyst community is overwhelmingly bullish about Tencent’s prospects. Bloomberg data shows the company has 50 buy recommendations and just one sell. The average price target is HK$507, or 51% higher than Tencent’s closing price on Wednesday of HK$336.

Still, the heavy weighting of Naspers — and Tencent – on the JSE make benchmarking “an absolute nightmare” for SA-focused investment managers, said David Nathanson, a global equity specialist at Bellwood Capital.

Nathanson said it is difficult to justify having such a high portfolio allocation towards a single stock, considering concentration risks and potentially damaging regulatory risks. In Naspers’ case, this relates to regulations that have hurt Tencent’s gaming revenues in China, and the fact that Tencent holds its internet operations through a variable interest entity in Hong Kong – an arguably precarious holding structure.

“When people are managing money, I think they need to put risk management first and returns second. So having a buy rating [on Tencent or Naspers] is one thing, but the more important question is probably how much would you actually put into it? And I think 20% is crazy and the way our index is set up is also a bit crazy,” he said.

Naspers’ market value has slipped 11% so far in 2018, or R172bn, largely due to Tencent’s decline. Naspers said in March, when it trimmed its stake, that it would not sell any more Tencent shares for at least three years.

Tencent said it plans to “reinvigorate” mobile gaming revenue growth. It would do this by “deepening engagement with our existing major titles”, monetising tactical tournament games, launching a broader range of games in high-revenue categories and taking its China-developed games to other markets. But these measures will take “several months” to take effect, the WeChat owner said.