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How To Buy Tencent Stock
If you’re wondering how to go about buying Tencent shares in Australia, it’s all fairly straightforward. In this article, we’ll cover all the basics you need to know about purchasing high-value international shares like Tencent.
Tencent or TCEHY is quite a safe bet as far as international shares go. The company has enjoyed consistent growth over the past five years. In 2020, the stock price experienced an acceleration and in early 2020, peaked at $61 per share! Even though TCEHY subsequently went down by 30% during the rest of that year, the company is still going strong overall.
What is Tencent?
Before investing in the company, it’s always best to know all about it, inside and out. Here’s a brief summary to help you with your research:
Tencent is a Chinese mega-corporation which focuses mainly on a wide range of Internet applications and services. The company is well-known for its online games and Chinese social media platforms. It’s currently the largest online company business in China and is currently valued at 472 billion USS.
Pony Ma founded Tencent in 1998 and it took a while for the company to really grow. In fact, it actually had a rather negative reputation at the start. This is owing to the fact that its first chat application was a blatant rip-off of ICQ, which was developed by AOL.
Tencent’s decision to invest in the gaming industry in around 2007 was what helped it take off. Titles like PlayerUnknown’s Battlegrounds and Honour of Kings currently pull in millions of gamers from all across the world.
Four years later, the company released ‘WeChat’, which is now used by 1 billion people worldwide. To put things in perspective, Facebook took eight years to reach that number. Tencent was able to do it in seven.
Why Buy Tencent Shares?
Before you go ahead and buy your first shares in Tencent, it’s important to know whether you’re making the right choice. Here’s a brief rundown of all the pros of investing in the Chinese tech giant:
- It has shown significant growth over the past five years
- Its gaming and chat offerings continue to be popular
- Forecasts point towards growth during the next couple of years
- It is tapped into the largest online gaming market in the world
There are two main takeaways from the list. The first is that Tencent seems likely to recover and propel upwards from its setback last year. The 30% drop was actually caused by new government regulations which were rolled out to counter gaming addiction. However, the tech conglomerate has always had a positive relationship with the government – a major reason for their incredible success. Therefore investors have confidence that they’ll have no problem adjusting to the new regulations.
In fact, Tencent has already taken measures to protect young gamers as a sign of compliance.
The second takeaway is that the company is firmly seated in an extremely profitable market. First of all, China is home to the biggest online gaming community in the world. There are currently 600 million gamers in the country and that number is expected to grow. Hence, as long as Tencent play their cards right and put out great titles, they should be just fine.
Secondly, their incredibly popular chat platform WeChat is a goldmine waiting to be tapped. In 2020, Tencent rolled out ‘Mini Programs’ which work in conjunction with WeChat Pay. These Mini Programs allowed the latter to interact with vendors, for things like ordering food or renting bikes. Currently, more than 200 million people use these programs and the number is rapidly increasing.
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Ways to Buy Tencent Shares in Australia
Living in Australia, you have two ways to invest in an international company like Tencent. The first way is to buy shares from the Australian Securities Exchange (ASX) using a direct stockbroker. The second is to enter into Contract for Difference (CFD) trading with a broker like eToro.
Buying Shares vs CFD Trading
The former is very straightforward. You purchase shares of a company at the current asking price and as a result, own a percentage of the company. You earn a profit either through dividends or selling off your stake when the asking price shoots up.
CFD training is different, letting you trade on price fluctuations of a stock. One huge advantage of buying a CFD is that you only pay a fraction of the asking price. This is referred to as ‘trading on margin’ and it allows you to buy more than you typically would. The trade-off is that you don’t actually own any underlying shares.
For example, imagine Tencent has a margin rate of 10%. This is the percentage of the share asking price that you have to pay for a CFD. Hence, for the CFD equivalent of a $10,000 with of stocks, you’ll only have to pay $1000. If the stock experiences a 30% increase in value, you’ll make a $3000 profit on a $1000 investment.
The biggest downside is that losses can be quite high. This is because your total loss/profit is calculated on a value of $10,000 instead of $1000. Hence, if the asking price undergoes a 30% devaluation, you’ll end up losing $3000 on a $1000 investment.
Here’s a list of the advantages CFD trading has:
- Less upfront investment due to trading on a margin
- No need to actually borrow stock, meaning no borrowing costs
- The CFD Market isn’t bound to Day-trading requirements
- In addition to stocks, CFD is compatible with commodities, indices, and currencies as well.
Where To Buy Tencent Stocks in Australia
Regardless of which route you choose to take to purchase Tencent stocks, you need to go through a broker. Brokers have a significant impact on whether or not you actually make a profit.
When it comes to CFD trading, there are two brokers that we trust the most: eToro and Plus500. Both have excellent platforms which offer round the clock access to major international markets.
eToro is very popular because of its CopyPortfolios and CopyTrader systems. The former allows you to diversify your portfolio easily by providing easy access to a variety of trading instruments. CopyTrader is extremely useful for amateur investors. It’s an autopilot feature which allows you to replicate the investment decisions of more experienced traders.
Plus500, like a lot of CFD brokers, does not charge trading fees or withdrawal fees either. Instead, they make a profit when you pay the spread. Even though it may not have the same features as eToro, it’s perfect for those who want a simple, user-friendly platform for trading CFDs.
When choosing a broker/platform you must ensure that it checks all the right boxes. It should be easy to access global markets and instruments and also manage a diverse portfolio. Furthermore, there should be tools to guide amateur investors through the process.
These are the basics of buying Tencent stock while living in Australia. To recap, you need to start off by doing your research on the company. Thankfully, most of the indicators point to future growth. Afterward, you need to determine whether to purchase stock outright or enter CFD trading. The latter is great if you don’t particularly care about owning stocks and have less start-up capital.
How to buy international shares in Australia
Invest in overseas stocks by following this simple guide.
Last updated: 29 January 2020
Thinking of investing in global shares? It’s easier and cheaper than you may think and there are plenty of options to get started. Investing in the global share market is a lot like investing in the Australian market, however you’ll need to find the right stock broker or online trading platform.
This guide will explain what to look for in an international share trading account, how to open one and what to do with the account once you’ve opened it. Read on to learn more, or start with the basics of share trading if it’s new to you. If you already know how to buy international shares, you can simply compare brokers and open an account.
Buy international shares in 4 steps
- Compare brokers with access to global stocks
- Open your account by providing ID
- Fund your account by transferring money from your bank account
- Search and select the shares you want to invest in and start trading
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- Monthly fee: $0.00
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Trade international shares with one of these brokers
How to invest in international shares
There are four main ways that you can access global shares from Australia. You can invest directly in shares listed overseas – such as Facebook and Apple – by using a broker with an international share trading platform, you can buy units in a global-themed exchange traded fund (ETF) or managed fund or you can invest in contracts for difference (CFDs) that track global shares.
Step 1: Compare options and choose a broker
There are many different account options to choose from, and it’s worth comparing them like you would any other financial product. Consider:
How much commission does the account charge for the execution of a trade? There may be flat rates, percentage rates or even no brokerage fees at all.
Access to markets
Which international markets does the account let you trade on? The big ones are the US markets like the NYSE and NASDAQ, which most providers will allow you to you access, but not every account will let you trade everywhere in Europe and Asia.
How long does it take for a transaction to be executed? Timeliness can be important when trading internationally.
How big is the buffer? Most international share trade orders will have a ‘buffer’ applied to them by the share trading platform provider. The buffer is a percentage of the order value, which is added onto the cost of the order to protect the provider from currency fluctuations while the trade clears, ensuring that they don’t lose money on routine trades.
How much of a cut does your provider take? When converting currencies, the provider may take a cut in the form of a percentage fee on currency converted. With big trades this can be a significant amount.
Does the provider charge any fees for opening an account with them? The benefits they offer may not always be worth it.
What investment research tools are available? Are you seeing real time market information or is there a delay? Are the research tools free to use or do they cost extra? It’s a lot easier to buy low and sell high when you’ve done your research, rather than relying on luck alone.
Customer service and access
Does your provider have a share trading mobile app, or desktop access only? Can you contact the provider outside of business hours? What are your options for getting in touch with them? Are they known for being helpful or not so much? When you open an international share trading account you’re using a service and you should expect a certain level of customer assistance.
Do you have to spend more than you want, or not as much as you want? One of the main restrictions to look out for when choosing an account is the presence of limits, which may be minimums or maximums that apply. You may not be able to make trades above or below a certain dollar value.
Step 2: Open your account
Once you’ve decided on an online broker, you can open your share trading account. If you already have a bank account with that provider then you can usually sign in via their online banking portal. If not, you will have to open a new account. To open an international share trading account you’ll generally need to meet the following eligibility criteria:
- Be 18 or over
- Have an Australian residential address
- Have a mobile number
As part of the application process you will typically need to provide:
- Personal photographic identification (for example your drivers license, passport and/or proof of age card)
- An Australian business number (ABN) and/or tax file number (TFN) if applicable
When opening the account you’ll be asked to choose whether you’ll be trading as an individual, with a joint account (for example, with your partner), as a company or organisation or on behalf of a trust (for example a SMSF). Because share trading has income and tax implications you must provide details of your income and occupation. Along with your personal information, you may be required to disclose the source of your income and the origin of your financial position.
After you’ve provided your personal details, you’re up to the account set-up stage. This involves providing the details of your linked bank account, setting up financing options if applicable and choosing from the various options that may be available. Once you’ve confirmed everything and double checked your details, you’re ready to load your cash management account and start trading.
Already have a share trading account?
Usually providers will require that you open one account for local shares and a separate account for international shares. If you already have a local account, you can open an international one in just a few quick steps. For example, with CommSec, login to your account, click on Portfolio > Offers and Apply > Applications > Add a new international account > Apply Now. Then simply choose the account you wish to link the international trading account to and submit your application.
Step 3: Fund your account and start trading
If you want to start trading right away, you’ll need to make sure you have enough funds in your linked international account to execute the trades, plus any broker fees that will apply. Remember that when you transfer funds into your linked foreign currency account you’ll usually have to pay a foreign currency conversion fee, so it’s best not to be transferring funds in and out of the account on a regular basis. It can take a few days for your funds to be loaded into the cash account, so keep this in mind when you decide you’d like to make a trade.
Once you’ve set everything up, you can trade online through your new international share trading account. Expect to see a dashboard with features such as current share prices and changes over time and options to buy, sell or research. With the big banks and other trading accounts geared towards beginners, you may find tutorials and introductory material to help acquaint you with the available features.
What’s the difference between Australian and international share trading?
When trading shares, you can choose to do it domestically or internationally.
Trade shares listed on Australian stock exchanges. Trade within certain business hours and access only Australian investment options, which make up about 2% of the global market.
Australian stock exchanges include the Australian Stock Exchange (ASX), National Stock Exchange (NSX) and Chi-X.
Trade shares from global markets around the world 24 hours a day, subject to local market hours, including big global brands and household names. Gain access to more options, but also experience more risks and challenges.
International stock exchanges include the New York Stock Exchange (NYSE), London Stock Exchange (LSE), the National Association of Securities Dealers Automated Quotations System (NASDAQ) and many others.
Compared to domestic trading, there are both advantages and disadvantages to trading shares internationally.
Advantages of international share trading:
- Gain access to a wider variety of investment options.
- An internationally diversified portfolio can help protect you from the downturns of the Australian market.
- You can trade 24 hours a day rather than only within set business hours.
- More buyers: The actual value of your shares depends on how much you can sell them for. When trading internationally, there may be a larger number of different interested buyers and you might find it’s easier finding a buyer.
Disadvantages of international share trading:
- Exchange rates can fluctuate and can significantly hurt (or help) your return on investment.
- Foreign policy can affect your returns. It’s possible that changes to another country’s foreign policies, local instability or other issues can impact the value of your investment in ways beyond your control. This is a largely uncontrollable risk.
- Taxation and related issues may be more complicated when trading international shares.
Some extra tips:
Making big trades? Look for lower exchange rates, research tools that allow you to make more reliable investments and flat broker fees rather than percentage rates. Where applicable, it may be worth accepting higher flat fees in exchange for lower percentage rates. Avoid low maximum limits which might constrain your trading.
Making a lot of small trades? You may want to avoid flat fees that take a big chunk out of the potential profits of each trade and stick to percentage rates that will cost you less. Low maximums are less of an issue, but high minimums might be a problem.
How will you diversify your portfolio? Not all accounts will give you the same options. Plan what kind of trades you want to make and consider whether a given account will let you trade CFDs, whether you can trade ETOs and/or ETFs and if you are able to do forex trading through the same platform.
Andrew Munro is the global cryptocurrency editor at Finder. After previously writing about insurance and other areas, he now covers the latest developments in digital assets and blockchain and works on Finder’s comprehensive range of guides to help people understand cryptocurrency.
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7 Reasons to Buy Tencent Holdings Ltd (TCEHY) And Never Sell
The biggest name you’ve never heard of needs a place on your radar.
You can be forgiven if you’ve never heard of Tencent (OTC:TCEHY) . Until last year, I only vaguely knew of it as a technology player in China — but the details of what the company actually did were murky.
My view started to change — markedly — as I read about all of the well-known U.S. companies that Tencent was buying stakes in, including Tesla, Activision Blizzard, and Snap. Once my interest was piqued, I was sold. The company has quickly come to occupy over 3% of my real-life holdings, and I have plans to add to that stake over the coming years.
One-third of WeChat’s billion users are on the app for more than four hours per day. Image source: Getty Images
Here are my seven big reasons for being so excited by the company and its potential to create lasting wealth for my family.
1) The compass guiding all decisions
Most investors don’t bother to check out a company’s mission statement. I think that’s a big mistake. A well-written mission statement isn’t a guarantee for long-term success, but I do think it’s required for a company to have a chance at being a wealth-creating investment.
The best mission statements have three things in common:
- They are simple enough to help guide an employee who has to make a difficult decision.
- The goals are big enough that there are multiple avenues — and revenue streams — for accomplishing them.
- They are inspirational far beyond “creating shareholder value.”
Tencent’s mission is:
“To enhance the quality of human life through Internet services.”
We’ll get to how Tencent is currently trying to do that below. But for now, it suffices to say that this easily checks all three of the required boxes of a great mission statement.
2) A founder-led company
I’m also a sucker for founder-led companies. If someone is just building organizations for the sake of getting rich, they would cash out immediately following a company’s IPO. For founders that stay on board, there’s much more at stake — often at an existential level. That means that the leader of a company is squarely focused on building something that will survive long after he/she is gone.
Tencent was founded by Ma Huateng — otherwise known as Pony Ma — in 1998. In the intervening twenty years, he has remained at the helm, and shows no signs of slowing down any time soon.
3) Management with skin in the game
Equally important, I like it when the founder has lots of his/her own skin in the game via stock ownership. Sure, they may not be in it just for the money, but it’s important to have something to lose, and stock ownership does that. It also helps guarantee that management has significant voting power if outside forces ever attempt to fundamentally change the company.
According to a recent CNN report, Ma has a stake of nearly 9% in Tencent shares.
4) Diversified businesses
Now we get to the meat of what Tencent actually does. In the beginning, a messaging system dubbed QQ was the workhorse. Since then, however, the company has found lots of ways to “enhance the quality of human life through Internet services.”
The most important piece right now is WeChat — a mobile application that has no peer here in the United States. It is part messaging system — voice, video, and text — part ride-hailing, part micro-social media, part payment systems. The app has over one billion followers, and one-third of those followers are on it for over four hours per day!
But it’s about more than just WeChat. Tencent is also the world’s largest gaming company, with games including Honor of Kings and League of Legends. Unsurprisingly for a company with such a reach, it also has a burgeoning advertising businesses as well. Here’s what growth has looked like:
Data source: Tencent IR.
5) A wide moat around the business
As impressive as that growth is, however, it wouldn’t mean much if Tencent didn’t have a moat around its various lines of business.
But investors can breathe a sigh of relief, because the company benefits from all four of the major moats a company can enjoy.
- Brand: Last year, BrandZ announced Tencent as the only non-American company among the Top 10 most valuable global brands.
- Network effects: A messaging and social media company is only as valuable as the number of users it has. WeChat has over 1 billion users — meaning non-users are incentivized to join, and it would be very difficult to replicate WeChat’s success.
- High Switching-Costs: As Tencent’s payment option becomes more popular and WeChat is used for ever more functions, it will soon become a pain for Chinese citizens to do anything online without the app.
- Low-Cost production: In this case, the “thing” being produced at a low cost is data. Tencent uses that data to offer targeted ads and grow its advertising business.
6) Future optionality
There’s really no telling what could be next for Tencent. The company’s mission statement and history prove that as long as a service could “enhance the quality of human life,” Tencent is willing to gamble on it.
The company is rapidly deploying AI services and has a growing cloud-computing division. Tencent announced a new program last year — Mini Programs — that essentially let other apps run on the WeChat app (creating apps within an app). And it’s hard to tell where the company’s aforementioned equity investments may take it, including its many smaller investments in homegrown (Chinese) businesses.
7) Incredible balance sheet strength
None of these ventures would mean anything, however, if Tencent didn’t have the financial fortitude to attempt to tackle such ambitious projects. On that front, however, Tencent has enviable strength.
|Cash||Debt||Free Cash Flow|
|$48 billion||$21 billion||$15 billion|
Data source: Tencent IR. Cash includes short and long-term investments. 1RMB = $0.16
Crucially, this cash balance does not include some of the more illiquid investments the company has made in some of its associates.
Take all of these things together and you have a company that — despite its $534 billion market capitalization and revenue growth of 56% over the past year — is still trading for a reasonable 36 times trailing free cash flow.
While the valuation may change over time, the seven strengths above have far more staying power. That’s why I think now is a good time to consider buying shares of Tencent and never selling them. My own skin is already in the game.
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