Tencent reports abysmal Q2 earnings
Gross profit is down 7% and operating profit is down 29%. Meanwhile, PC client game revenues see a decline of 5% on the year and that in turn is causing a major drag on Naspers, who owns 31% of the company, as its shares are down 10% on the South African stock exchange - the most in 10 years.
The profit struggles are widely expected as Chinese regulators have been cracking down on video game releases by either outright banning it or delaying permissions for newer releases in recent times. But poor results are poor results, there's no skirting around that.
Tencent pulls a weight of 9.6% on the Hang Seng index and as tech stocks suffer it is the main anchor in what is driving the index to near one-year lows at the close today. Only HSBC (10.3%) pulls a higher weight on the index than Tencent stocks.
By the look of things, we're going to breeze past the September 2017 lows tomorrow. The index is already down by more than 18% from this year's peak and a bear market doesn't look too far away now.
And what bodes ill for Tencent bodes ill for tech stocks in general too. This will at least cause a bit of negativity in tech stocks when US markets open later. Watch out for the Alibaba and the Nasdaq later today. If it begins to look ugly, it may provide some tailwind for the Japanese yen.
