Aberdeen adds Tencent, keeps China bets

Big player: A man rides past a sign for Tencent outside its headquarters in Beijing. China’s copyright rules are unlikely to have a big impact on its online subscriptions. ― AFP

HONG KONG: Veteran fund manager Hugh Young said his firm bought the dip in Tencent Holdings Ltd and kept most of its other big-tech holdings in China largely unchanged during the recent selloff on expectations these stocks will emerge as winners despite policy crackdowns.

While keen on Chinese tech, Aberdeen Standard Investments, which oversees about US$639bil (RM2.71 trillion) in assets globally, is avoiding the education sector, according to the Singapore-based chairman of its Asia unit. In fact, bellwethers in most industries offer upside opportunities, including property developer China Vanke Co, said Young, who has been with Aberdeen for three decades.

“I don’t think anything strategic has changed” in China and regulations will benefit the responsible players, he said in a video interview.

“We have topped up with Tencent,” adding to what already was a large holding in the sector.

Tencent shares fell as much 3% yesterday to the lowest since Aug 6 while the Hang Seng Tech Index declined as much as 1.8% to its lowest since July 28. Both have dropped more than 20% this year due to China’s sweeping overhaul of technology giants.

Young’s optimism remains despite Chinese officials saying that more regulation is coming to the world’s second-largest economy over the next five years. About US$1 trillion (RM4.24 trillion) of value was wiped out from China shares listed on the mainland, Hong Kong and the United States last month amid clampdowns on sectors ranging from education to technology.

His views contrasted with that of other global asset managers, including Ark Investment Management’s Cathie Wood, who has said she has been selling China equities and warned that valuations would probably “remain down.” Some sovereign wealth funds and analysts also shared Young’s confidence on China.

“China is trying to make everything fairer for its citizens,” Young said. “Does that put us off investing in China? No,” he said, noting that regulatory crackdowns also “happened in other economies when things boomed.”

New regulations may keep coming, but leaders of the world’s second-largest economy were not looking to destroy sectors, and that means top companies will benefit from such moves, Young said, pointing to the housing market, where more measures are likely, but that hasn’t prompted Aberdeen to unload its shares in top developers.

China will probably “correct regulatory policies for the sector’s good,” he said. That means companies such as China Vanke, in which his firm owns shares, “will ultimately be net beneficiaries,” said Young.

“Huge opportunities” will come with a broadening of the economy and “responsible growth,” Young said.

Meanwhile, a Reuters report noted that Tencent Music Entertainment Group said on Monday that China’s copyright rules are unlikely to have a big impact on its online subscriptions, and its chief executive believes regulators want to promote healthy development of the music industry.

Tencent Music’s second-quarter profit beat Wall Street expectations on Monday, as its advertising business rebounded and more people subscribed to its music streaming platform.

Paid subscribers for the company’s online music service grew 41% to 66.2 million, a record high, boosted by investments in long-form audio and a refreshed music library expanded by licensing deals with Universal Music Group, Sony Music and other labels.

Shares in Tencent Music rose 3.1% in extended trading after its earnings release, paring back losses that saw it fall 9% earlier on Monday.

The shares have lost half their market value this year due to Beijing’s crackdown on its tech giants and a ruling that barred the company’s parent, Tencent Holdings, from exclusive music copyright agreements. ―Bloomberg

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