Tencent Holdings Ltd (0700.HK) and Samsung Electronics Co Ltd (005930.KS) are racing to be crowned Asia’s most valuable business as expectations for robust earnings growth press their share prices to record highs.
Their surge – both have developed by a third this year – has made them the world’s best performing large-cap technology stocks and highlights how these nimble Asian companies are booming while competitors Apple Inc (AAPL.O) and Alibaba (BABA.N) have fought.
“These companies can grow gains despite weaker international growth,” said Andrew Gillan, head of Asia ex-Japan equities at fund managing business Henderson Global Investors, which can be heavy on Asian technology businesses.
“The operating principles of the Chinese net sector particularly have surprised positively in the most recent quarterly results.”
While many investors remain upbeat about Samsung and Tencent, some caution the companies are vulnerable to rapid swings in opinion on any hint of slowing momentum. Samsung and Tencent have been more explosive as opposed to Asia technology sector .MIAS0IT00PUS and the broader marketplace .MIAS00000PUS this year.
On Wednesday, Samsung said sales of its latest flagship smartphone were out-stripping supply, but second-half gains could take a hit if generation shortfalls will not be repaired and a recovery in parts demand does not eventuate.
Moody’s Investor Service also warned that Samsung’s profit margins might narrow in the second half due to seasonal factors in competitive pressures and the consumer electronics business.
The market expectations that are driving shares are themselves a risk, in accordance with Nomura. A faster-than-anticipated slowdown in personal computer game sales, aggressive spending and new products or business models from adversaries could weigh on earnings, the bank warned.