Shares in Naspers rallied to a record high on Thursday in a fifth straight session of gains, bolstered by improved sentiment towards China’s economy.
By market close the stock was up 6.67% to R4,174.80, bringing its gains for the past week to about 13.5%.
Much of Thursday’s rally appears to have been driven by the group’s largest investment, Chinese technology giant Tencent, which was up 6.07% in Hong Kong.
Chinese stocks were generally higher on the day, including Temu parent PDD, Alibaba and JD.com. To many observers the rally is attributed to the US Federal Reserve’s 50 basis-point interest rate cut last week, which prompted some market players to speculate that China’s central bank may soon do the same.
Vestact Asset Management noted that the MSCI Asia-Pacific index has been pushed up during the week by Chinese stocks in Hong Kong and on the mainland, which have recorded some of their biggest gains in seven months.
That came after People’s Bank of China governor Pan Gongsheng introduced new policy measures to lift the struggling economy and improve market confidence. The rally was led by banks, property developers and brokerage firms.
Naspers is the largest shareholder in internet giant Tencent, through its Amsterdam- and JSE-listed subsidiary Prosus. Its shares rose the most since December on Thursday, gaining 7.48% to R746.10.
Naspers and Prosus have each gained about 33% so far this year.
While Tencent remains the main profit driver and cash through dividend income for the Naspers stable, the company is also seen as a point of concentration risk.
“Tencent remains the biggest single risk, with any earnings miss likely to lead to weakness in the Naspers share price,” FNB equity analysts Peet Serfontein and Zimele Mbanjwa said in a note.
Besides Tencent, “risks to our fundamental view include weaker macroeconomic conditions and forex depreciation within emerging markets, regulatory delays, as well as price competition in key markets. Higher-than-expected development costs in start-up internet businesses are also a concern over the short term,” they added.
Prosus, which has been under pressure to show the value of its non-Tencent investments, reported a profit for the year to end-March, surpassing its initial goal of achieving consolidated e-commerce profitability by the first half of the 2025 financial year.
For several years management has been trying to unlock value in Prosus’ vast portfolio of businesses in food delivery, classified adverts, fintech and education, which together are estimated to be worth $30bn but aren’t fully reflected in the share price.
Still, the value of units such as PayU, Brazil’s iFood, Germany’s Delivery Hero and India’s Swiggy are dwarfed by the group’s $100bn stake in Tencent.
Update: September 26 2024
This story contains new information throughout.
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