TCEHY Tencent Holdings Ltd (PK)

By Clarence Leong

Shares of Tencent Holdings Ltd. are trading lower for a second day in Asia after its largest shareholder said it would sell part of its stake in the Chinese internet giant to fund a share buyback program.

Tencent shares are down 5.0% at 359.20 Hong Kong dollars (US$45.77) early Tuesday in Hong Kong, trading near their lowest closing level in almost a month. The stock has lost about 19% this year.

Amsterdam-based internet conglomerate Prosus NV, a unit of South Africa's Naspers Ltd., on Monday said it will start unloading small numbers of Tencent shares to fund an open-ended share-repurchase program. Prosus holds roughly a 29% stake in Tencent.

Tencent's Hong Kong-listed shares closed Monday down 1.6%.

Analysts said the share sale is likely to hurt sentiment on the Chinese tech company in the short term.

The move is "more negative than a regular insider's selling" because Prosus has walked back on an earlier promise not to sell more Tencent shares until 2024 and hasn't specified how much of the stake it will sell, Nomura analysts Jialong Shi and Thomas Shen said in a note.

"We expect Tencent shares to trade under pressure in the near term," they added, while keeping a buy rating and HK$455.00 target price on the stock.

China Galaxy International Securities analyst Mark Po said in a note that Prosus' plan "may cap Tencent's near-term performance," but added that the news is "fully digested." Mr. Po said he has a constructive view on Tencent partly because messages from Beijing seem to be turning more positive on the sector. The brokerage keeps an add rating on the stock with a HK$440.60 target price.

Daiwa Capital Markets analysts also think the share sale will dampen sentiment, but said in a research note that actual shares sold could be less than the block trades conducted by Naspers in previous years. Daiwa has a buy rating on Tencent.

Write to Clarence Leong at clarence.leong@wsj.com

(END) Dow Jones Newswires

June 28, 2022 00:21 ET (04:21 GMT)

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