Tencent’s US$16.4 billion dividend surprise lights up Hong Kong stock market while JD.com slumps

  • Tencent to distribute most of its holding in JD.com to shareholders as interim dividend, a stake valued at US$16.4 billion at current market price
  • Hang Seng Index is building on a three-day winning run as investors continue to see value in beaten-down stocks

Hong Kong stocks advanced for a third day as Tencent Holdings rallied after announcing a surprise US$16.4 billion dividend windfall to shareholders, hogging the limelight in local trading. JD.com tumbled.

The Hang Seng Index gained 0.2 per cent to 23,140.28 at the local noon trading break. The Tech Index slid 1 per cent, while China’s Shanghai Composite Index rose 0.1 per cent.

Tencent, the WeChat operator, surged 4.8 per cent to HK$460.80, the most in two months, after proposing to distribute a large chunk of its shareholding in JD.com valued at HK$127.7 billion (US$16.4 billion) as interim dividend in specie.

JD.com crashed 7.1 per cent to HK$259.40, set for the worst decline since a 9.4 per cent sell-off on July 26, on concerns it may lose the support of one of China’s biggest tech companies. The dividend plan will leave Chairman and CEO Richard Liu Qiandong and Walmart as JD.com’s biggest shareholders, based on its most-recent annual report.

“Other tech giants are likely to follow suit as Chinese authorities would like these big companies to reduce their market share in other sectors,” said Gary Ching, vice-president of research at Guosen Securities (HK). “The risk is transferred to retail investors, so they should be cautious of such dividend actions.”

The Hang Seng Index has fallen 15 per cent this year with US$283 billion of market value erased from its 64 blue-chip members. The setback ranks Hong Kong as the worst performer among major global stock markets, unable to overturn losses caused by a series of regulatory crackdown and an economic slowdown.

Alibaba Group Holding fell 1.5 per cent while Meituan retreated 3.5 per cent on concerns Chinese regulators are continuing to monitor tech companies for breaches.

Recent trends, however, suggest investor sentiment on Hong Kong stocks is improving. Mainland investors have ploughed more money into local shares for 21 consecutive days, making it a good time to buy, said Linus Yip, chief strategist at First Shanghai Securities in Hong Kong.

Three firms started trading for the first time on the mainland. Yongan Futures Co soared 44 per cent. Nantong Chaoda Equipment surged 117 per cent and Henan Carve Electronics Technology jumped 73 per cent.

Markets in Asia-Pacific were mostly upbeat, with stocks in Australia, Japan and South Korea logging 0.2 per cent to 0.5 per cent higher.

Author: Cheryl Heng, SCMP

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