Financial Association news on January 8 (Editor Hu Jiarong) $TENCENT (00700.HK)$ After a drop of more than 7% yesterday, it adjusted again today. As of the time of this report, it fell by 3.37%, reporting at 366.8 Hong Kong dollars.

In news, TENCENT was included in the Military Industry list of Chinese companies by the USA Department of Defense. The company stated in a declaration, "TENCENT being listed is clearly a mistake; we are not a Military Industry company or supplier. Unlike export controls or others, this list does not affect our Business. Nevertheless, we will work with the relevant USA departments to resolve the misunderstanding."

Until last night, TENCENT issued another announcement stating that being included in the Military Industry list by the USA Department of Defense was completely an error, and it has planned to initiate a review process.

It is worth noting that the southern capital net bought as much as 14 billion Hong Kong dollars yesterday, becoming a major highlight in the market that day.

How do Institutions view TENCENT being included in the Military Industry list by the USA Department of Defense?

Sealand pointed out that TENCENT has been included in the list, which will cause emotional disturbances in the short term, but the actual impact is limited, and the sudden drop is a Buy opportunity. It explained that the sanctions from the USA against entities on the list mainly prohibit Trading with the US Department of Defense.

Furthermore, TENCENT's overseas Business mainly involves the gaming Sector, belonging to C-end Business, accounting for 9% of total revenue. This list does not impose direct restrictions on the overseas Business of listed companies with ordinary enterprises or individuals, only directly restricting Trading interactions with the US Department of Defense, thus having limited actual impact.

Previously, several Chinese companies successfully removed themselves from the list through litigation, and it is expected that TENCENT will likely initiate a lawsuit later, referring to the higher success rate of other private companies post-litigation.

DBS also released a research report stating that TENCENT being included in the Military Industry list surprised the market, dragging down its and Hong Kong stock prices. However, considering that the company’s business model mainly revolves around social networks and online gaming, not being a state-owned enterprise and not participating in major military projects, there is a great chance it will be delisted from the list afterward.

The bank also pointed out that being included in the list does not bring specific sanctions or direct penalties, and it is expected to only potentially cause reputational damage, and might deter other companies from potential collaborations.

Citi released a report stating that it understands the market's panic response, but believes that TENCENT being on the list does not necessarily mean there is enough evidence to confirm it as the right decision. The bank is confident that TENCENT will work hard to cooperate with the USA Department of Defense to resolve any misunderstandings and noted that several companies successfully removed from the list last year after providing effective explanations.

The bank continued to state that investors are generally sensitive; therefore, TENCENT's stock price may be dragged down in the short term, but believes that the overall growth prospects and basic business factors remain unchanged. Citi reiterated its "Buy" rating, viewing the stock price pullback as a good buying opportunity, with a target price of 573 Hong Kong dollars unchanged.

TENCENT's major shareholder has once again reduced their shareholding, and the company has doubled its buyback.

According to the equity information disclosed by the Hong Kong Stock Exchange, on January 6, TENCENT's major Shareholder Prosus sold 0.367 million shares of TENCENT at an average price of approximately 409.73 Hong Kong dollars per share, cashing out approximately 0.15 billion Hong Kong dollars, reducing its Shareholding to 23.99%.

However, to mitigate the impact of Prosus's Shareholding reduction on the market, TENCENT yesterday spent 1.5 billion Hong Kong dollars to repurchase its own shares, which is double the recent regular repurchase scale of 0.7 billion Hong Kong dollars per day.

编辑/jayden