Naspers and Prosus shares recover some of their heavy losses

THE SHARE prices of JSE tech stock leaders Naspers and Prosus yesterday recouped some of the massive losses they incurred over the previous two days, which were spurred by China’s clampdown on private sector online education, which affected their biggest investment, internet group Tencent.

By midday yesterday, Naspers, which owns 29 percent of Tencent, traded 3.8 percent higher at R2 643.50 on the JSE, while subsidiary Prosus, with its main listing in Amsterdam, traded 3.4 percent higher at R1 226.85 on its secondary listed market.

The share prices of both companies had slumped more than 7 percent on

Monday and on Tuesday, respectively.

The shares closed yesterday at R2 747.44 and R1 267.62.

The accelerating slide in Tencent’s share price meant its price had fallen by 42 percent from an all-time high in February.

Shareholders in Naspers and Prosus – including the Government Employees Pension Fund – have lost more than R240 billion in the value of their investments in these two groups so far this year.

Anchor fund manager Mike Gresty said in a note that Tencent’s share price drop over the past few days only took it back to levels last seen in June last year, and even after the recent decline, Tencent had delivered compound growth of more than 20 percent over the past six years, although he admitted this was likely to be of little consolation to shareholders currently.

Naspers derives some 82 percent of its underlying net asset value (NAV) from its stake in Tencent, had seen its share price decline 34 percent since a February high.

Gresty said the fact that Naspers’s share price had fallen by less than that of Tencent’s was thanks to rand depreciation over the intervening period.

“We have been sceptical of the view that Naspers’s large discount to NAV would provide much protection for Naspers shareholders in the event of a large Tencent share price drop and, this time around, the discount provided very little protection,” said Gresty.

Gryphon Asset Management portfolio manager Casparus Treunicht said the move by the Chinese government might only be a precursor to further controls on the tech sector in that country, and the changes were permanent in nature, suggesting structural changes to the operations of Tencent.

He said the tighter regulation might also “snowball” into other countries.

The growing regulation of tech companies by governments was, for instance, evidenced by recent talks among G20 leaders for a minimum global corporate tax rate of 15 percent on large tech companies.

Regulation was being tightened because these companies had crossed “a number of boundaries” in recent years, such as being taxed only in their home countries while generating income from other countries, said Treurnicht.

He said Naspers’s and Prosus’s share prices had broken their long-term upward trend.