Tencent Holding LTD - Turf wars in Asia
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Tencent Holding LTD - Turf wars in Asia

Tencent Holdings Ltd, which is Asia's most valuable company, recently invested $604 million in Vipshop Holdings Ltd. an online apparel platform in an apparent escalation of it's ongoing rivalry with Alibaba Group Holdings in the Asian retail sector.

Tencent’s share price has risen by 122% in the past year

graph 0108 tencent

SOURCE: Yahoo Finance

In exchange for the investment Tencent has received a 7% stake in Vipshop. At the same time long term Tencent ally JD.com Inc. (which Tencent is already a major stakeholder of) invested $259 Million in exchange for a 5.5% stake in Vipshop.

The deal seems to represent the latest in a series of ongoing pushes by Tencent into Alibaba's dominance of the retail sector where Tencent hopes to leverage WeChat, its messaging service that currently boasts 963 million users, and it's online payment systems to increase shopping demand and tap into China's growing middle classes. Tencent's President, Martin Lau, commented that the investment would bring Tencent's “audience, marketing solutions and payment support” to Vipshop.

Tencent and Alibaba's have a historical rivalry represented by a series of competing investments in a number of distinct markets including food delivery and gaming. This new investment by Tencent will allow Tencent access to Vipshop's base of young, female consumers and the personal and transaction data that comes with them – a useful tool in their attempt to compete with Alibaba's Alipay system.

All this has occurred in the context of Alibaba's $10 billion push into brick and Mortar stores, JD.com's announcement that approximately 100 Chinese apparel merchants abandoned its platform following what Chief Executive Richard Lie called “Coercive” tactics by the company's competing platforms, and Tencent's plans to invest $636 million in Yonghui Superstores Co Ltd. Supermarket and recent investments in Tesla, spotify, lunar drones and asteroid mining.

Disclosure

Dominion holds Tencent in its Global Trends Ecommerce Fund


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