B2B | Business news | Business news in India | Small business ideas

Tencent’s Ma Huateng Overtakes Jack Ma As China’s Richest Amid Coronavirus Lockdown

Tencent's Ma Huateng overtook Ali Baba's Jack Ma to become the richest person in China again as the shares of his internet gaming giant have increased 14% so far this year, to the highest in two years, thanks to the strong demand for its mobile games during the coronavirus lockdowns.

As of Thursday, Ma Huateng has a net worth of $ 48.2 billion, up from $ 38.1 billion since Forbes calculated the fortune of the world's billionaires on March 18. Meanwhile, Jack Ma has a fortune of $41.2 billion, up from $38.8 billion in the same period. Ma Huateng was previously named the richest person in China in early March, with a net worth of $ 44.5 billion.

Tencent shares received a 3.5% boost when markets opened on Thursday, a day after they announced their strong performance in the first quarter. Like other gaming and Internet companies around the world, Tencent saw an increase in demand for its services between January and March, when China was in lockdown to contain the spread of the coronavirus. But as the country gradually eases its measures of social distancing, Tencent faces uncertainties along the way and could give up its recent gains.

Jack Ma,Ma Huateng

Challenging China's accumulated consumption and the broader economic slump, Tencent beat market expectations by posting a 31% rise in revenue from its gaming business, the largest source of revenue, in the first quarter.

"Our platforms and products were not in great need and were more convenient because users stay at home," said Tencent Ma, who founded the company and its chairman and chief executive officer, said during a phone call to an analyst on Wednesday.

Strong performance in mobile games Peacekeeper Elite and Honor of Kings led the increase in gaming revenue. Tencent's total revenue increased 26% to 108.1 billion yuan (about $ 15 billion) in the first quarter.

But analysts see grace as temporary. As schools and offices reopening amid gradual relaxation of lockdown restrictions, people will spend less time on games.

Furthermore, the prolonged economic recovery from China's GDP contraction of 6.8% in the first quarter is likely to push consumers back on spending. This, coupled with the lack of major new game releases yet, is likely to lead to lower game growth this quarter compared to the first quarter, says Cui Chenyu, chief research analyst at Omdia.

"In the second quarter, growth in China will not be very clear," says Cui. Based on preliminary data, revenue from smartphone games is estimated to have decreased by 15%, respectively, in April and May.

Tencent is aware of headwinds. The technology giant said in one of the files that it expected "to significantly increase gaming time and in-game consumption activity across the industry as people return to work."

ma huateng,Jack Ma

Offsetting the downside in China is strong growth abroad.  As the COVID-19 pandemic continues to force people to stay indoors in many countries, and with new game features, revenue from the company's hit PUBG Mobile game reached "record levels" respectively in March and April, according to Nan Lu, president of China Mobile Insights at the sensor tower research company.

Tencent also needs to deal with dwindling advertising spending as companies will be affected by the looming recession. Reported a 32% increase in total advertising revenue, which reached 17.7 billion yuan. One of the main reasons is that while people spend more time at home and on the Internet, advertisers have taken advantage of the 1.2 billion ad launch period targeting the WeChat messaging platform and social media platform, which now boasted 1.2 billion users.

James Mitchell, chief strategy officer at Tencent, warned that gains could taper off. He said in the analyst call that advertisers can adjust their budgets on the back of less time spent online, and multinationals could reduce their spending "significantly" by facing the pandemic in their own markets.

In light of the near-term headwinds, Tencent's online advertising revenue could grow 20% this year, compared to a previous forecast of 22%, as wrote Thomas Chung, Managing Director and Head of Chinese Internet in Jefferies, in a research note.

In search of new sources of growth, the company recently made a series of investments. Canadian coffee chain Tim Hortons announced this week that it had received an undisclosed amount of investment from Tencent. Earlier this month, Australian financial tech company Afterpay revealed that Tencent had raised a 5% stake in the company. The companies said in an online statement that there is potential for cooperation in areas such as geographic expansion and future payment options.

Also Read: Jio to play a key role in the development of 5G ecosystem in India: RIL

  • Share
logoSubscribe now