Citigroup Says Tencent Stake Cut Was Unexpected and May Hurt Kuaishou Sentiment

Citigroup said it was surprised by Tencent Holdings’ reduction of its stake in Kuaishou Technology and warned the move could weigh on market sentiment toward Kuaishou. According to Jin10, Citigroup said that although Tencent had previously indicated it might use its investment portfolio to fund shareholder returns, the latest stake cut was still unexpected, especially given that Kuaishou’s valuation was not high. The report noted that Kuaishou’s subsidiary Kling has just completed a private placement financing, and Tencent invested about $200 million to obtain a 1.12% stake. Citigroup said this suggests Tencent may be reallocating its older investment portfolio toward new artificial intelligence investments to diversify its ownership and strengthen its positioning in AI. Citigroup said the stake reduction could damage market sentiment toward Kuaishou and raise concerns about whether Tencent will further sell shares in Kuaishou or other investee companies. However, Citigroup said Kuaishou’s fundamentals remain unchanged and Kling has development potential. The bank maintained a positive view on Kuaishou, kept its “buy” rating, and maintained its target price at HK$72.