Tencent: The Swiss Army Knife of China’s Internet—Sharp, Versatile, and Still Undervalued

Tencent: TCEHY US, 700 HK

Good Afternoon,

We are back at it! The China Internet review won’t wrtie itself and so we proceed. Today we are looking at the most valuable of the internet giants in China - Tencent. This is the third piece in the series, perviously we’ve published on:

• Alibaba (the free report in the series)

• Baidu

Much like the other pieces in the series, this has been a very valuable exercise for us. Given $TCEHY’s size and thus weight in indices (especially in the MSCI family) it’s been an auto-own for a very large number of investors. This in turn leads to if not outright ignorance but certainly less then full focus on the specifics of the company by a lot of investors. This may sound counter intuitive, how is it possible that a big (almost 10%) portfolio position is under-covered? Teh answer is since one has to own it for beta, its market characteristics take over and become more important than its business prospects. Today’s report corrects that and focuses squarely on Tencent as a business.

The report is for premium subscribers, and as such, is behind a paywall. If you are interested in it, do consider joining.

We will discuss Tencent’s role in the portfolio in the Panda Portfolio review this Sunday, which again is a Premium feature available to full subscribers. We’ll touch base on Tencent vs Baba vs Baidu on the Podcast on Monday too, unless bigger stories break by then.

Macro Minute will be back early next week too, focusing on the 2 Sessions preview. Really looking forward to it, and it will, for the most part, be generally available.

The series on China Internet will continue Next week with reviews of Meituan and PDD, so the reports will keep coming until we settle on a 1 report per week schedule after we’re done with this series and as we settle in to a more sustainable pace. For now though we continue the Archive buildout, so let’s dive in to Tencent.

But before we get in to it, a reminder. Nothing in this Substack is Investment Advice. This information is provided for informational purposes only and does not constitute financial, investment, or other advice. Any examples used are for illustrative purposes only and do not reflect actual recommendations. Please consult a licensed financial advisor or conduct your own research before making any investment decisions. The authors, publishers, and affiliates of this content do not guarantee the accuracy, completeness, or suitability of the information and are not responsible for any losses, damages, or actions taken based on this information. Past performance is not indicative of future results.

Here we go!

Introduction to Tencent: A Technology Giant’s Journey

Founding and Early Years (1998–2004)

Tencent Holdings Limited (0700.HK) was founded on November 11, 1998, in Shenzhen, China, by Ma Huateng (Pony Ma), Zhang Zhidong, Xu Chenye, Chen Yidan, and Zeng Liqing.

The name Tencent (腾讯, Téngxùn) carries multiple layers of meaning, reflecting both speed and ambition while also embedding a deeper numerical symbolism within Chinese culture. We don’t normally spend that much time on this part, but its important to understand the nature of a comapny we’re describing here, and so

A Dual Meaning: “Soaring Information” and “100%”

The “Soaring Communication” Interpretation

The first part of the Chinese name, “腾” (Téng), means “to soar” or “to gallop,” symbolising rapid progress, innovation, and ambition.

The second part, “讯” (Xùn), translates to “information” or “news,” highlighting Tencent’s origins in digital communication.

Together, “腾讯” (Téngxùn) can be understood as “soaring communication” or “fast-moving information,” aligning with the company’s early focus on instant messaging (QQ) and digital connectivity.

The “100%” Interpretation: The Numerical Play on “Ten Cents”

In Chinese, “十” (Shí) means “ten,” and “分” (Fēn) means “cents” or “parts.” The phrase “十分” (Shífēn)translates to “100%” or “completely.”

This interpretation conveys perfection, completeness, and excellence—qualities that Tencent has sought to embody in its business operations.

The English translation “Tencent” was chosen as a phonetic equivalent that also echoes the Chinese idea of “十分钱” (ten cents), reinforcing the 100% metaphor.

The duality of the origin of the name highlights its ability to evolve over time. Tencent is a shape-shifting titan, constantly reinventing itself—from a humble messaging platform to a gaming juggernaut, a fintech powerhouse, and now an AI-driven cloud empire—adapting, expanding, and dominating new frontiers with every evolution.