To Naspers shareholders – hold onto your hats, rocky times ahead

by Alec Hogg

The Naspers story is well known in South Africa. Visionary Koos Bekker splashed $32m in borrowed money to buy almost half of a Hong Kong start-up called Tencent. It became the best private equity investment in history, with Tencent's market value up 2000 times, a surge mirrored in the Naspers share price. But what goes up…

Over the past four weeks, the Chinese Stock Market has lost more than a third of its value. Contagion from Shanghai's Crash has been seeping quietly into the value of Hong Kong listed shares. Now the drip torture is turning into visible pain. Yesterday HK's Hang Seng index dropped almost 6%. It's likely the formerly independent territory's agony has just begun.

The Tencent share price lost almost 7% yesterday taking the total decline since the China Market Crash started to 17%. Even though Tencent accounts for the lion's share of the Naspers valuation, the South African company's shares have held up relatively well, losing a relatively modest 12% in the same period.

Looks to me there's a couple of delayed reactions. Hong Kong stocks took time to absorb what was happening in Shanghai. Their fall is now in full cry. Naspers shares have also been are taking a while to react to the Tencent slide. If it weren't a conflict of interest for journalists to trade, I'd be going short on Naspers right now. Big time. Its shareholders will need to hold onto their hats.

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