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The Trouble With China

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Contributor
Oi ve! Chinese Government seems intent in regulating TenCent into it's "rightfull place", which is clearly not the largest company in China. First they make it clear they will regulate internet banking and payment, to protect the Chinese State owned banks. Now they want to take the profit out of WeChat and QQ with threatened advertising cuts. Read for info... http://www.bloomberg.com/news/2014-05-29/tencent-criticized-by-china-state-media-as-some-accounts-li... Exact details are still lacking, in terms of company impact, but this could well hurt TenCent a great deal. A topic thread that should be on your "check regular" list if you are a long term NPN investor...
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As far as I can tell - current marketing revenue is roughly 1/10th of the revenue they make from mobile gaming - so I don't think there is cause for too much concern over existing revenue streams. The issue here, is that Tencent's valuation is elevated due to expectations in the investment community that mobile banking and advertising have not scratched the surface yet - and that government regulation might get the investment community to rethink the potential. Personally, I say there is no way to know - a company that still reports 60% growth despite these challenges, is worth holding on to.
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As far as I can tell - current marketing revenue is roughly 1/10th of the revenue they make from mobile gaming - so I don't think there is cause for too much concern over existing revenue streams. The issue here, is that Tencent's valuation is elevated due to expectations in the investment community that mobile banking and advertising have not scratched the surface yet - and that government regulation might get the investment community to rethink the potential. Personally, I say there is no way to know - a company that still reports 60% growth despite these challenges, is worth holding on to.
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Contributor
Thanks for the info Skaaptjop. Did some more research and put things in better perspective after the post. "The Committee" is taking personal aim at internet liberties, are feeling threatened and legislating accordingly. There is little indication at this stage that any of the legislation is going to target their bottom line too severely. A number of recent acquisitions and service expansion projects will probably more than make up from Chat service ad revenue decline due to regulation.... Keeping an eye on this though as the story develops. Should blow over in a month or so as recent attack emotions calm down....
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Super Contributor
there IS a red telephone in every office
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Super Contributor
IT - I.T. - Any way you spell it - Oy Vey!
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