Tencent Holdings Ltd. (700), China’s biggest Internet company, plans to invest $1 billion in its e-commerce unit to meet rising demand for online shopping.
The company will look for opportunities to invest in e-commerce operators and strengthen collaboration with other online vendors, it said in a statement yesterday. Tencent named President Martin Lau as chairman of the e-commerce unit.
Tencent is cutting prices of products such as electronics for online shoppers and investing in delivery and logistics to win business from competitors including Alibaba Group Holding Ltd. and 360Buy.com. The transaction value of China’s e-commerce market may climb 42 percent this year to 1.1 trillion yuan ($173 billion), according to JPMorgan Chase & Co. in January.
“They have a lot of advantages with the large user base, and in the past, the company successfully diversified into new businesses such as online games and social networking,” said Michael Ting, who rates Tencent shares outperform at CIMB Securities in Hong Kong. The investment in e-commerce may affect Tencent’s short-term profitability, he said.
Tencent rose 0.7 percent to HK$215.80 as of 1:29 p.m. in Hong Kong trading. The stock has gained 36 percent this year, making it the best performer in the city’s Hang Seng Index.
Alibaba, China’s biggest e-commerce company, operates online shopping sites including Taobao and Tmall. 360Buy.com, based in Beijing, raised $1.5 billion last year in a stock placement to investors including Russian billionaire Yuri Milner’s Digital Sky Technologies.
Tencent will be integrating its e-commerce sites including QQ Mall and Paipai, it said.
The Shenzhen, south China-based company will reorganize its business units to expand services for smartphone and social-networking users and accelerate growth of its online-game operations overseas, it said last week. Tencent achieved a “big step-up” in its e-commerce revenue in the first quarter, Lau said last week.
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