Chinese authorities aim to take board seat by buying stakes in high flying internet giants that are widely held in many funds for sale in Asia.
According to a Wall Street Journal report, the state is considering 1% ownership in the form of “special management shares”, which has the potential to influence company decision-making.
Companies the state is targeting include Tencent and two social media platforms under Alibaba, Weibo and Youku, the report said.
The investment concern is that initial ownership stakes could increase or spread to other companies and ultimately work against the strategic growth plans of the expanding internet giants.
Tencent became one of the most widely-held companies in Asian equity portfolios but it is also a holding in many poor performing China funds.
Although the technology firms are seen as a pillar of China’s new economy, surveillance over internet information remains a government priority.
With the cybersecurity law enacted earlier this year, the surveillance body in China has fined microblog service Weibo and Tencent’s messenger-operator WeChat for disseminating what it sees as fake news and other inappropriate information on their platforms. The new law is set to monitor internet content that might “jeopardize national security”.
Government media has also became vocal over the issues in the internet space. In July, the communist party’s People’s Daily (in Chinese) described one of the mobile game apps that pay you real money developed by Tencent as “a toxicant”.
Funds with the biggest weighting in Tencent*
| Templeton Asian Dividend A Acc USD | 10.24% |
| JPM Greater China A Dis NAV HKD | 10.20% |
| Templeton China A Acc USD | 10.13% |
| BOCHK China Consumption Growth | 10.60% |
| Allianz Choice Asian Ord C | 10.00% |
Source: FE. *66 funds registered for sale in Hong Kong have a 5% or more weighting in Tencent.
