Tencent Holdings Ltd.

For now, concerns around Tencent's fintech business should be manageable, given that its payments service is not directly tied to consumer lending, a primary concern from the regulator's perspective. Consumer lending is primarily carried out through its 30%-owned and regulated WeBank Co., Ltd. (BBB+/Stable/A-2). Stricter compliance with regulations will likely slow Tencent's revenue growth as merger and acquisition activities might decelerate and intensifying competition could affect its profitability. This is likely to be somewhat offset by strong demand growth for online services going forward. The stable outlook reflects our expectation that Tencent will maintain double-digit revenue growth over the next several years driven by mobile games, online advertising, cloud computing, and payments. We believe the company will generate strong cash

...Regulatory risk remains for Tencent Holdings Ltd., despite the company's content focus. We believe the company could be less affected by anti-trust and fintech provisions given its content platform. Tencent's content is less likely to face typical anti-trust actions such as exclusivity agreements. However, its sizeable market shares, large user base and data collection practices, significant equity investments, and distribution of third-party content could still be at risk of anti-trust fines and penalties. Some media reports suggest that the company could be facing possible fines for anti-trust concerns related to its Tencent Music business and acquisitions it made without registration with the State Administration for Market Regulation (SAMR). For now, concerns around Tencent's fintech business should be manageable, given that its payments service is not directly tied to consumer lending, a primary concern from the regulator's perspective. Consumer lending is primarily carried out through...

Full Report