Latest news with #Tencent
Reuters
9 hours ago
- Business
- Reuters
China's stock market favours foxes over hedgehogs
LONDON, May 29 (Reuters Breakingviews) - 'The fox knows many things, but the hedgehog knows one big thing.' The famous adage of the ancient Greek poet Archilochus is reflected in investors' deeply contrasting attitudes towards China's stock market. Over the past year, the foxes, who have a trading mentality, have been riding a rally in Chinese equities. Hedgehogs have stayed away. The one thing they know is that the People's Republic is no place for long-term investors. Over the past decade, U.S. stocks have trounced Chinese equities. That order has reversed this year. Since the beginning of January, the S&P 500 Index (.SPX), opens new tab is basically flat while the MSCI China Index (.dMICN00000PUS), opens new tab, which includes mainland companies listed in Hong Kong and New York, has climbed over 10%. On the surface there's plenty for investors to get excited about. Chinese companies remain ultracompetitive, as evidenced by the country's massive trade surplus. The People's Republic boasts several world-class firms, including tech giant Tencent and carmaker BYD. It also dominates cutting-edge technologies from electric vehicles to battery storage. Viewed over a longer period, Chinese equities have profoundly disappointed. Since the re-establishment of the country's stock market in the early 1990s, they have returned a mere 3.3% a year after inflation, according to UBS. That's just half the average long run historic return of the U.S. stock market, and in line with the return on Chinese bonds. The country's stocks look relatively cheap at 15 times cyclically adjusted earnings, less than half the level of their U.S. counterparts. But Chinese equities traded at a similar valuation 10 years ago. What explains the systematically low returns from Chinese stocks? In his recently published book 'The Making of Modern Corporate Finance, opens new tab', the author and consultant Donald Chew argues that China has adopted the form of Western financial practices - stock exchanges, regulators, brokers, and auditors - but not their substance. Chinese companies and investors operate without the strict rule of law or strong property rights. Beijing views the stock market primarily as a place to raise cheap capital rather than reward those who provide it, says Chew. There's no market for corporate control in China. Minority shareholders have little influence. Listed Chinese companies have low profit margins and sluggish asset turnover. Over the past decade, their returns on equity have fallen from 10% to 6%, according to Gillem Tulloch, founder of Hong-Kong based GMT Research. A recent paper, opens new tab by Ben Inker and Anna Chetoukhina of the Boston-based investment firm GMO finds that the mildly negative annual returns on Chinese stocks in the decade between September 2014 and September 2024 were due to deteriorating fundamentals and significant shareholder dilution. The issuance of additional stock lowered returns by 2.6% a year over this period, according to GMO. The addition of several highly valued tech companies, such as Alibaba and Baidu, to the MSCI China Index provided an additional drag. Chinese stocks deserve a steep discount to other markets because companies reinvest close to 100% of their profits at structurally low returns, GMO concludes. Future changes to the MSCI China Index may not to be so damaging to investors while the decline in returns on capital could turn out to be a cyclical phenomenon. After all, investors were put off by years of lacklustre returns from Japanese stocks until former Prime Minister Shinzo Abe instituted a series of reforms after returning to power in 2012. Since then, the Nikkei 225 Index (.N225), opens new tab has more than trebled. Chinese authorities last year tried to revive the stock market as part of efforts to stimulate the world's second-largest economy. There's little evidence, however, that President Xi Jinping is a convert to shareholder value. If anything, he has moved corporate China in the opposite direction. Public companies are expected to conform to Xi's vision of 'common prosperity', which means avoiding supposed capitalist 'excesses' and following the Communist Party's priorities. State-owned enterprises, which account for around half the Chinese market's capitalisation, are cogs in the party's machine. Their resources are often allocated at the government's behest. For instance, when Beijing launched its massive stimulus programme in late 2008, the biggest listed banks provided much of the credit, while many other SOEs became involved in supporting the property market. Private Chinese companies regularly face pressure to support the government's priorities. Business leaders who step out of line, as Alibaba founder Jack Ma did in October 2020 when he publicly criticised Chinese financial regulators, face repercussions. Companies that operate in sectors that have fallen out of favour with Beijing are liable to be crushed, as investors in private education providers discovered in 2021. Although the epidemic of corporate fraud that erupted in the early 2010s has abated, Chinese financial statements are the least reliable in Asia, says Tulloch. Company research provided by analysts based on the mainland is also of low quality, he says. The risk factors listed in Chinese IPO prospectuses are watered down to comply with rules banning comments that disparage government policies or the business environment, argues Ian Williams in his book 'Vampire State: The Rise and Fall of the Chinese Economy", opens new tab. Despite the Chinese stock market's lacklustre returns over the past 15 years, investors have had opportunities to make money. During this period there have been several strong market rallies, including two full-blown bubbles, starting in 2014 and 2020. The trick for investors is to front-run those rallies by gauging when Beijing is poised to support the market. That's what happened last year, when the People's Bank of China lowered the reserve requirement for banks and set up a stock market lending facility. The securities regulator banned short sales. Large shareholders were instructed not to sell shares and state-owned entities stepped in to support the market. More recently, Chinese tech stocks have benefitted from optimism about advances in artificial intelligence. Speculative foxes who anticipated these moves are licking their chops. They should not overstay their welcome. Hedgehogs believe that foreign investors in China face similar risks to those operating, until recently, in neighbouring Russia. In their view, Chinese stocks are only ever a trade and not an investment. Follow @Breakingviews, opens new tab on X
News24
18 hours ago
- Business
- News24
SA shares enjoy best May since 2013
• For more financial news, go to the News24 Business front page. South Africa's benchmark stock index is heading for its best month in almost a year, with a helping hand from China's most valuable company. The FTSE/JSE Africa All Share Index is up more than 7% in dollar terms in May, on track for its biggest monthly gain since June last year and its best May performance since 2013. It has outperformed emerging-market peers as well as the S&P 500 and the Stoxx Europe 600. The largest contributor to the rally has been tech investor Naspers, which soared after China's Tencent in which it owns a stake, reported a faster-than-anticipated 13% rise in sales. Naspers, which accounts for more than 12% of the index, contributed one fifth of the monthly gain in index points, according to data compiled by Bloomberg. That's almost three times as much as any of the next three stocks, which include two platinum miners and Prosus - which holds Naspers' stake in Tencent. Stars align Whether the rally continues will depend on the South African coalition government's commitment to push through economic reforms, metal prices and the 'sell America' trade that is driving investment to developing nations, said Peter Takaendesa, head of equities at Mergence Investment Managers. 'If a few stars align such as continued fund flows toward emerging markets, and structural reforms in South Africa pick up some pace at the same time with a continued broader recovery in global commodity prices, then our market could continue to push higher,' Takaendesa said. Naspers has climbed more than 5% this month on investor optimism that Tencent will weather the challenging economic outlook in the coming months. The WeChat operator's sales rose to 180.02 billion yuan (R450 billion) in the March quarter, as it benefited from the Chinese tech comeback triggered by DeepSeek. Platinum producers Sibanye Stillwater, Northam Platinum and Impala Platinum, were also among the top performers as the metal rose to a two-year high. Domestic-facing sectors such as retailers and banks, however, underperformed as political uncertainty damped consumer confidence and the outlook for the economy soured, Takaendesa said. South Africa's central bank resumed its easing cycle on Thursday to offer support to the stuttering economy as inflation remains benign. The monetary policy committee cut the benchmark interest rate by 25 basis points to 7.25%, the lowest in more than two years, while downgrading its forecasts for economic growth. The cut will provide support for some sectors such as retailers, Unum Capital analyst Lester Davids said. The All Share Index declined 0.4% in Johannesburg around 15:00 local time.
Independent Singapore
19 hours ago
- Business
- Independent Singapore
Is China finally lifting its K-pop ban? BTS company Hybe opens first office in Beijing
Photo: Facebook/Zoie Coups BEIJING: BTS's agency Hybe has opened its first office in Beijing as hopes grow that China may soon end its near-decade-long ban on K-pop performances, according to Bloomberg. A Hybe spokesperson said the company opened an outpost in Beijing last month. Recently, both Hybe and SM Entertainment have been strengthening their teams focused on the Chinese market. Just this week, the South China Morning Post (SCMP) reported that Tencent will be acquiring close to 10% of SM Entertainment for around US$180 million (S$232.13 million) in what would be one of the few major Chinese investments in a South Korean firm in recent years. The shares will come from Hybe, which is offloading its remaining 2.2 million SM Entertainment shares at 110,000 won each, based on a regulatory filing. There's growing anticipation that China may soon lift its unofficial ban on K-pop performances, which has been in place since 2016, driving up stock prices. Hybe shares have climbed 40% this year. SM Entertainment is up around 70%, and YG Entertainment, which manages Blackpink, has gained over 75%. Unlike SM, which had artists touring China before the ban, Hybe has had limited presence there. It shifted focus to the US and Japan instead, acquiring Ithaca Holdings—the company behind Ariana Grande and Justin Bieber. /TISG
Yahoo
a day ago
- Business
- Yahoo
Chinese AI start-up DeepSeek pushes US rivals with R1 model upgrade
By Brenda Goh and Eduardo Baptista SHANGHAI/BEIJING -Chinese artificial intelligence startup DeepSeek released the first update to its hit R1 reasoning model in the early hours of Thursday, stepping up competition with U.S. rivals such as OpenAI. DeepSeek said via developer platform Hugging Face that R1-0528 was a minor version upgrade of R1 that nevertheless significantly improved its depth of reasoning and inference capabilities, including better handling of complex tasks, bringing its performance closer to OpenAI's o3 reasoning models and Google's Gemini 2.5 Pro. The launch of R1 in January went globally viral, sent tech shares outside China plummeting, and challenged the view that scaling AI requires vast computing power and investment. Since R1's release, Chinese tech giants like Alibaba and Tencent have released models claiming to surpass DeepSeek's. Thursday's update was initially light on details in contrast to the launch of R1 in January which was accompanied by a multi-authored academic paper that the AI community worldwide has parsed to understand the firm's strategies. The Hangzhou-based firm said later in a short post on X that R1-0528 featured improved performance. In a longer post on WeChat, DeepSeek said the rate of "hallucinations", false or misleading output, was reduced by about 45-50% in scenarios such as rewriting and summarizing. It said the update also enabled it to creatively write essays, novels and other genres, and had improved capabilities in areas such as generating front-end code and role-playing. "The model has demonstrated outstanding performance across various benchmark evaluations, including mathematics, programming, and general logic," DeepSeek said. DeepSeek's success has upended beliefs that U.S. export controls were holding back China's AI advancements, after it released AI models that were on a par or better than industry-leading models in the United States at a fraction of the cost. The startup added on Thursday that a variant of its update was created by taking the reasoning process used by the R1-0528 model, to then further enhance Chinese tech giant Alibaba's Qwen 3 8B Base model, a process known as distillation. The result was a performance surpassing the original Qwen 3 model by over 10%. "We believe that the chain-of-thought from DeepSeek-R1-0528 will hold significant importance for both academic research on reasoning models and industrial development focused on small-scale models," DeepSeek added. Bloomberg reported the update on Wednesday. It said that a DeepSeek representative had told a WeChat group it had completed what it described as a "minor trial upgrade" and that users could start testing it. In response to competition from Deepseek, Google's Gemini has introduced discounted tiers of access while OpenAI cut prices and released an o3 Mini model that relies on less computing power. Deepseek is still widely expected to release R2, a successor to R1. Reuters reported in March, citing sources, that R2's release was initially planned for May. DeepSeek also released an upgrade to its V3 large language model in March.
South China Morning Post
a day ago
- Business
- South China Morning Post
Chinese robotics star Agibot adds JD.com as investor, joining Tencent as Big Tech backer
Chinese e-commerce giant has recently become a shareholder in Tencent Holdings -backed robotics star AgiBot, as China's robotics industry has become one of the most closely watched sectors this year among investors and tech giants. AgiBot, also known as Zhiyuan Robotics, was established in 2023 by a founding team that included Huawei Technologies veterans and professors. The company recently added JD subsidiary JD Technology as a shareholder of its main entity, Shanghai Zhiyuan New Innovation Technology, according to a company record change on May 22 from registry information provider Aiqicha. Another new shareholder is Shanghai Embodied Intelligence Venture Fund, formed just last month with backing from the Shanghai government. AgiBot has set a record in total funding among its Chinese peers, according to a Thursday post by Shanghai State-owned Capital Investment, which owns the Shanghai Embodied Intelligence Venture Fund. Following the investment, which saw each new shareholder take a 0.75 per cent stake in AgiBot, the Shanghai-based robotics start-up boosted its registered capital by 2.7 per cent to 82.6 million yuan (US$11 million), according to Aiqicha data. It is not clear whether the start-up has launched a new funding round. Neither JD nor AgiBot immediately responded to requests for comment on Friday. Shanghai Embodied Intelligence Venture Fund could not be reached for comment.
