速評：Preliminary analysis of Tencent's anti-corruption campaign on its stock price

"Tencent Holdings said on Monday that it fired more than 100 employees for bribery and embezzlement last year, and it blocked 23 companies from doing business with the Chinese social media and video gaming giant.The scope of the internal corruption appeared more severe than in 2021, when it affected nearly 70 staff and blacklisted 13 firms in its anti-corruption campaign."

Our preliminary analysis as below

The anti-corruption campaign had blown from government to state-owned enterprise over the past few years, and now extend to tech giants, like Tencent, Alibaba, and Baidu. It can be seen as the newest signal of those tech giants giving in to the government to exchange more space in their business. So we saw Tencent got a lot of gaming business permission lately, Ma Yun gave up control rights of Ant group, and more analysts believe the regulation tightness may loose in the near term. From the point of investment, it would be a good sign of recovery and reduction of uncertainty from regulation. However, it’s not a free meal. China government already obtains the “gold share” of many tech-giant, which means government may interfere in the decision and operation of those companies. It would trigger more suspicion in western countries that the relationship between these tech giants and the government. Just like the US government claimed telecom giant Huawei was linked to People's Liberation Army(PLA). At this moment, we think the relieved relation with China government may be good for their stock price in the short-term, however, mid-to-long term the close tie with China government may bring more trouble oversea.