Tencent Pulls Away From Facebook as Chinese Tech Euphoria Swells

(Bloomberg) -- Tencent Holdings Ltd. is widening its lead over Facebook Inc. as the world's most valuable social network company, riding a growing wave of optimism in Chinese technology.

The WeChat operator, which briefly overtook its U.S. counterpart in capitalization during Asian hours in November, has shot ahead after Facebook's recent selloff. The U.S. company's shares have slid more than 5 percent since co-founder Mark Zuckerberg outlined plans to highlight content from family and friends at the expense of media outlets and businesses. Tencent's risen by almost the same amount over that period, establishing a $19 billion lead.

That entrenches the Chinese company among the global top five, well ahead of arch-foe Alibaba Group Holding Ltd. Investors are betting that Tencent can lean on its billion-plus users and hit games to evolve into an advertising and entertainment titan along the lines of a Google or Facebook. Created almost two decades ago as a desktop messaging platform before morphing into one of the world's biggest purveyors of video games, the argument is that its dominance of Chinese social networking also bankrolls an expansion into newer markets from video streaming to finance.

The valuations of Chinese tech companies have also inflated as concerns about the country's economy fade. Kuaishou is the latest manifestation of that euphoria, a Tencent-backed video-sharing app that's said to be seeking a $17 billion valuation after just seven years in business. And smartphone maker Xiaomi Corp. is said to be speeding ahead with an IPO that could help it garner a valuation of as much as $100 billion.

Tencent wouldn't be the first Chinese corporation among the world's biggest. Investor enthusiasm for a raft of newly listed government-run entities inflated the valuations of old-economy names such as Industrial & Commercial Bank of China Ltd. in the last decade. PetroChina Co. in 2007 became the world's first $1 trillion company.

To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net.

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Edwin Chan, Reed Stevenson

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