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Nov 11, 2020 12:21 pm ·

China's Tech Titans Suppressed by New Antitrust Guideline

On 10 November, the Chinese State Administration for Market Regulation published the draft version of 'Antitrust Guidelines on the Platform Economy,' targeting the largest Chinese tech titans like Alibaba, Tencent, Meituan's market power in some areas. The guideline is to curb monopolistic behaviors in the field of the Internet platform economy. It set out unregulated conducts, for example, unfair prices, lower than the cost selling, deal decline and different treatment to consumers. Behavior such as WeChat (from Tencent) banning Tik Tok's or Taobao's links may be illegal, according to the draft. The guideline has resulted in BABA declining by around 9.5%, Tencent dropping by about 9.4%, Meituan and JD.com sinking by 9%, 7.3% respectively within two days from the time of the report. Alibaba and Meituan are the 'victims' because of their incredible market shares and power. According to Equalocean's research, Alibaba owned 50.1% cake of China's E-commerce business in 2019. Based on Trustdata, Meituan grabbed the lion's share of 65% in the Chinese delivery food area over the same period. Alternatively, CITIC Securities' analysts believe that the announcement harms Tencent the least as its market shares in related sectors have not let the company reach significant monopolistic positions. It may affect WeChat, but in gaming, advertisement, and finance landscapes, the social media giant hasn't dominated these spaces.

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Sep 19, 2020 02:47 am ·

Trump Plans to Block WeChat and TikTok Downloads on Sunday

The Commerce Department plans to restrict access to TikTok and WeChat on Sunday as the Trump administration's executive orders against the two apps are set to take effect, according to CNN business. The Department said Friday that, as of Sunday, any moves to distribute or maintain WeChat or TikTok on an app store will be prohibited.  While users who have already downloaded the apps may be able to continue using the software, the restrictions mean updated versions of the apps cannot be downloaded. The restrictions targeting WeChat are more extensive. Beginning Sunday, it will be illegal to host or transfer internet traffic associated with WeChat. WeChat, one of the world's most popular social messaging apps, is owned by the Chinese Internet giant Tencent. And it is a popular marketing and sales tool for the United States companies, primarily in China. TikTok's parent company is Beijing-based ByteDance.  The department's move is the enforcement of Trump's original executive order from Aug 6 that gave TikTok 45 days to sell its US business to an American company or face a ban in that country. But the announcement also lays out a different time frame specific to TikTok, giving it until Nov 12 to resolve the US national security concerns.  The deadline set for the TikTok deal is a Sunday, Nov 12, leaving time for TikTok and Oracle to hammer out a deal that can be approved by Trump and the Chinese government.

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Aug 13, 2020 02:36 pm ·

Tencent Continues to Expand Business in Education

Tencent disclosed its Q2 2020 and 1H 2020 reports on August 12. The financial report data shows that the tech giant hit CNY 30.15 billion in net profit, a year-on-year increase of 28%; the total revenue of CNY 114.88 billion also saw a year-on-year increase (29%). In terms of communications and social networking services, as of the end of June 2020, the combined number of monthly active accounts for WeChat was 1.206 billion, a year-on-year increase of 6.5%. The latest 'Tickle' (Chinese: 拍一拍) function has stimulated many creative interactions, and the new live broadcast function in the WeChat home-school group has also made online education through WeChat more convenient. In cloud and other enterprise services, Tencent has expanded its business in new vertical fields such as education to help customers achieve digital transformation. The use of customized design and the establishment and expansion of its own ultra-large digital center have improved the performance of cloud services and optimized costs. Tencent stated: "Due to the continuing impact of the COVID-19, offline projects have not yet fully resumed. However, we have signed major contracts with financial institutions and public service customers and expanded our medical and education services. Businesses in emerging vertical fields help customers achieve digital transformation. In terms of technology and infrastructure, we use customized equipment and are establishing and expanding our own ultra-large data centers, which will help us to improve our cloud services in the long run."

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Aug 7, 2020 10:00 pm ·

The Ban Seems Less Dangerous for Tencent than ByteDance

August 6, 2020, Trump took additional steps in his mobilization against Chinese technology, targeting another China's giant in the form of Tencent. Similar to the action on TikTok, the messaging service app WeChat owned by Tencent will be banned, as will any US transactions with Tencent. Those executive orders, released late Thursday, will take effect in 45 days. Again, the US government cited national security issues when announcing restrictions on two popular Chinese social media apps. Now, under extremely high pressure, ByteDance is seeking an acquisition agreement with a US company; Microsoft is currently negotiating with ByteDance to acquire part of TikTok, which is scheduled to be completed on September 15. About the impact of this executive order: 1) In 2019 Q4, Tencent's overseas game revenue accounted for 23% of overall game revenue, which was a relatively low percentage of its total revenue. It's been estimated that revenue from the US accounted for about 20% of overseas game revenue, and less than 5% of Tencent's overall game revenue, and less than 1% of the company's overall revenue – therefore, the ban has a limited impact on the company's revenue; 2) In terms of advertising, overseas WeChat users account for a relatively low proportion of WeChat's overall users. The number of US users is limited, and the level of monetization is low. It will not have a significant impact on advertising business revenue; 3) In other social entertainment fields (video, music, reading), the company's main business is concentrated in China. The current domestic market payment penetration rate is still low, and long-term development space is sufficient; 4) In terms of cloud business, in April 2018, the US Trade Representative Office (USTR) began to work on restrictions on cloud computing services invested by Chinese companies in the U.S., After that, Chinese activity in the US is relatively limited. The main overseas revenue comes from the European and Southeast Asian markets. Tencent's current major investments in the US include: Riot Games (holding controlling interest); Epic Games (holding 48.4% stake); Activision Blizzard (holding 6.0% stake); Spotify (holding 10.0% stake); Snapchat (holding 10.0% stake; Tesla (holding 5.0 stake). According to an analyst from Huatai Financial Holdings, Tencent's current investments in the US are mainly in the field of entertainment content and do not involve the social communications field that this ban focuses on, and Tencent does not have a controlling stake in most of the companies it invests in, that is, it does not have the authority to obtain and manage user data. It's been estimated that Tencent's main investment in the US currently only accounts for about 3% of Tencent's current market value, and the overall risk is controllable.

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Aug 7, 2020 03:49 pm ·

Tencent Ecosystem Member WeiMob's Stock Experiences Roller Coaster Ride

After United States President Donald Trump signed the executive order of banning the China-based social media platform WeChat, the stock of the owner of the platform, Tencent (00700:HK), responded instantaneously with HKD 30 billion losses and is only slowing climbing back. Previously recommended with a buy by EqualOcean, the stock price of Weimob (02013:HKEX), the Chinese echo to Shopify (SHOP:NYSE), slumped 10% after the market opened with the WeChat banning order. Weimob being a WeChat ecosystem member company, its market performance was inevitably affected by the blow to Tencent. At the time of publication, Hang Seng Tech Index had dropped over 3% for the day. WeChat has over 1,100 million users worldwide but most of them are located in China. The instant message app is also a mega app that integrated functions like moment sharing, video chat, in-app games, e-marketplaces, e-payment, and so on. As a social media platform, WeChat creates an ecosystem for users and developers. The banning order’s influence on Tencent’s operation can be contained, as its biggest market is still China. From Huawei, TikTok to WeChat, the US leader has been widening his 'China Tech Attack.' Banning orders have come one after another – for many commentators, these were issued without solid evidence to support them. The uncertain geopolitical maneuvers rocked the tech market. Hong Kong tech shares started low following the recent news and are now fluctuating and slowly rising on a small slope.

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