Recently, Tencent Holdings encountered significant market turbulence after being included on the U.S. Department of Defense's list of military enterprises, resulting in a stock price drop of over 7% in a short period. Although the company quickly responded, stating that this decision was a mistake and planning to initiate a review process, the market reaction was still pronounced, impacting investor sentiment. Institutions have varying opinions on this event but generally believe that Tencent's fundamentals remain unaffected.

（Source: uSMART HK）

According to Guohai Securities, Tencent’s inclusion on the military enterprise list may cause short-term emotional disturbances, leading to a sharp decline in stock prices; however, this dip presents a buying opportunity. Guohai Securities emphasized that the sanctions imposed by the U.S. on listed entities mainly involve prohibiting transactions with the Department of Defense, while Tencent’s overseas business primarily focuses on the gaming sector, which only accounts for 9% of its total revenue. Therefore, the list does not impose direct restrictions on Tencent’s overseas dealings with other ordinary enterprises or individuals, resulting in a relatively limited substantive impact.

Furthermore, DBS Bank noted that Tencent’s inclusion on the military enterprise list surprised the market and directly dragged down its stock price and the Hong Kong market. However, considering that Tencent’s business model revolves around social networking and online gaming, and that it is not a state-owned enterprise and does not participate in significant military projects, DBS believes there is a strong chance that Tencent will be removed from the list in the future. The institution also pointed out that while being on the list may cause reputational damage, it would not trigger specific sanctions or direct penalties.

Citibank also offered a positive perspective on the situation. They acknowledged the market's panic response but argued that Tencent’s inclusion on the list does not necessarily imply that there is sufficient evidence to justify this decision. Citibank believes that Tencent will work hard to cooperate with the U.S. Department of Defense to resolve any misunderstandings. Last year, several companies successfully removed themselves from the list after providing effective explanations, and Citibank remains optimistic about this possibility.

Despite facing short-term market fluctuations, Citibank reaffirmed its "buy" rating and maintained Tencent's target price at HKD 573, viewing the current stock price pullback as a good opportunity to increase holdings. Institutions broadly agree that Tencent’s long-term growth prospects remain robust and that its fundamentals are unaffected.

Notably, while Tencent's stock price fluctuated, southbound capital bought a net HKD 14 billion during the market adjustment, indicating investor confidence in Tencent. In terms of shareholders, Tencent's major shareholder, Prosus, sold 367,000 shares on January 6, cashing out approximately HKD 150 million and reducing its stake to 23.99%. To mitigate the market impact of this sell-off, Tencent subsequently announced a share buyback worth HKD 1.5 billion, which is double the recent daily buyback scale of HKD 700 million.

In summary, although Tencent faces a short-term crisis from being included on the military enterprise list, institutions generally believe its fundamentals remain strong, and the market's emotional fluctuations provide potential buying opportunities for investors. As Tencent works to clarify misunderstandings and seeks legal avenues to address the issue, its future market performance looks promising.

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（Source: uSMART HK）