Home / World / Tencent’s China Literature surges as much as 100% in Hong Kong debut

Tencent’s China Literature surges as much as 100% in Hong Kong debut


Wu Wenhui, co-chief executive officer and executive director of China Literature, pauses during a news conference in Hong Kong, China, on Oct. 25, 2017.

Anthony Kwan | Bloomberg | Getty Images

Wu Wenhui, co-chief executive officer and executive director of China Literature, pauses during a news conference in Hong Kong, China, on Oct. 25, 2017.

Another reason for the surge in share price was the greater willingness of investors to place bets amid upbeat sentiment in Hong Kong markets, Wen said.

In addition, ZhongAn Online P&C Insurance’s solid IPO performance in September likely made investors optimistic about China Literature’s prospects, he added. ZhongAn Online, which drew parallels because it was a relatively large tech firm, saw its shares rise as much as 18 percent on its first day of trade.

While the online literature segment is fairly competitive, with players such as Alibaba Literature and Baidu Literature keen on getting a slice of the pie, China Literature’s share of the market is fairly sizable: The company claimed it had a 48.4 percent share of the mobile digital literature market in its prospectus.

Still, whether or not the company’s business model ultimately proves successful remains to be seen.

“On one hand, people are genuinely convinced [about China Literature] as there are not many listed competitors,” said Kevin Leung, director of global investment strategy at Haitong International Securities Group.

The Chinese government usually allowed for one major player in each internet industry, Leung explained, pointing to Tencent, Alibaba, Baidu as examples. “[P]eople do see China Literature as the chosen one for the cultural and literature industry,” he said.

Despite that, Leung pointed out that investors on the other side of the spectrum were worried that China Literature’s business model could be easily replicated.

Leung added that even though the shares were currently expensive, high momentum stocks have outperformed value stocks this year. While he expected China Literature’s stock to remain strong in the near future, Leung said accumulating shares would be better when prices eased to around $80.

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