The Naspers Dip: A Temporary Setback or Long-Term Challenge?

The tech rivalry between Washington and Beijing is intensifying as US President-elect Donald Trump’s inauguration nears, driven by trade disputes, allegations of technology theft, and military competition. As the world’s two largest powers clash over influence and strategy, their uneasy relationship continues to shape global affairs.

Recent Developments

Beijing recently announced plans to restrict exports of technology critical to extracting minerals vital for the global electric vehicle (EV) industry. Meanwhile, the US Department of Defense added Chinese tech giants Tencent and CATL to its 1260H list, targeting companies allegedly tied to China’s military.

Tencent, a major holding of Naspers, faced market turmoil after being blacklisted by the US. This led to a drop in Naspers and its subsidiary Prosus shares by up to 10%, erasing over R300 billion in value. Despite being designated as linked to China’s military, Tencent maintains that its operations remain unaffected. This situation adds to Naspers’ existing challenges, including its 25% stake in Tencent via Prosus and past geopolitical losses, such as the 2022 write-off of Russian investments during the Ukraine invasion.

Tencent’s Response

In response to the Department of Defense’s action, a Tencent spokesperson told CNN: “We are not a military company or supplier. Unlike sanctions or export controls, this listing has no impact on our business. We will nonetheless work with the Department of Defense to address any misunderstanding.”

Implications for Naspers and Investors

Naspers remains popular among South African retail investors, with nearly 30,000 investors on EasyEquities. While the listing doesn’t impose immediate sanctions, its reputational impact could temporarily hinder Tencent’s business progress, particularly in the US.

Tencent has reiterated that its operations remain unaffected and is working with US authorities to resolve the issue, suggesting the situation could be addressed amicably. For shareholders, this appears to be a temporary setback rather than a long-term challenge. Naspers’ significant stake in Tencent, combined with Tencent’s strong fundamentals and global growth potential, positions the company for recovery if geopolitical tensions ease. The current dip may present an attractive entry point for investors confident in Tencent’s resilience and ability to maintain market leadership.

Strategic Moves by Tencent

In an effort to boost shareholder value after the DoD's decision, Tencent repurchased the most shares in nearly two decades. Mainland Chinese investors also bought HK$14 billion of Tencent shares via exchange links with Hong Kong, making it the top purchase of the day.

Conclusion 

When a company buys back its shares and retail investors step in during turmoil, it could signal confidence in its long-term value, helping stabilize prices and boost sentiment. For Naspers, with Tencent as its largest holding, this could improve its portfolio's valuation and provide a buffer against market uncertainties.

Understanding the effects of sanctions, blacklisting, or reputational damage is crucial. Moreover, evaluating moves like China’s tech export restrictions can reveal emerging risks and opportunities. Diversification across regions and industries could help reduce exposure to geopolitical shocks.