HK Stock Market Move | TENCENT(00700) falls over 2% in early trading; Tencent raises over US$5.7 billion in bond financing to support AI capital expenditure.

TENCENT(00700) fell over 2% in early trading. As of press time, it was down 1.46% at HK$419, with a turnover of HK$887 million. On the news front, Tencent will raise US$5.7 billion through the issuance of RMB and US dollar bonds to support its growing investments in AI. The company has priced RMB26 billion in offshore bonds and has launched the issuance of US$1.8 billion in US dollar bonds. This issuance will be Tencent's largest offshore bond offering since 2020. Morgan Stanley recently released a research report stating that it expects Tencent's third-quarter gross profit to grow 9.7% year-on-year, with a gross margin of 56.8%, and non-IFRS operating profit to decline 3.1% year-on-year. Excluding the impact of the AI business, operating profit is expected to grow 10% year-on-year, while the AI business is expected to post an operating loss of RMB15 billion. AI investment is dragging down short-term earnings performance.