How To Buy Tencent Shares In Australia – Easiest Way to Invest (2020)

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How To Buy Tencent Stock

If you’re wondering how to go about buying Tencent shares in Australia, it’s all fairly straightforward. In this article, we’ll cover all the basics you need to know about purchasing high-value international shares like Tencent.

Tencent or TCEHY is quite a safe bet as far as international shares go. The company has enjoyed consistent growth over the past five years. In 2020, the stock price experienced an acceleration and in early 2020, peaked at $61 per share! Even though TCEHY subsequently went down by 30% during the rest of that year, the company is still going strong overall.

What is Tencent?

Before investing in the company, it’s always best to know all about it, inside and out. Here’s a brief summary to help you with your research:

Tencent is a Chinese mega-corporation which focuses mainly on a wide range of Internet applications and services. The company is well-known for its online games and Chinese social media platforms. It’s currently the largest online company business in China and is currently valued at 472 billion USS.

Pony Ma founded Tencent in 1998 and it took a while for the company to really grow. In fact, it actually had a rather negative reputation at the start. This is owing to the fact that its first chat application was a blatant rip-off of ICQ, which was developed by AOL.

Tencent’s decision to invest in the gaming industry in around 2007 was what helped it take off. Titles like PlayerUnknown’s Battlegrounds and Honour of Kings currently pull in millions of gamers from all across the world.

Four years later, the company released ‘WeChat’, which is now used by 1 billion people worldwide. To put things in perspective, Facebook took eight years to reach that number. Tencent was able to do it in seven.

Why Buy Tencent Shares?

Before you go ahead and buy your first shares in Tencent, it’s important to know whether you’re making the right choice. Here’s a brief rundown of all the pros of investing in the Chinese tech giant:

  • It has shown significant growth over the past five years
  • Its gaming and chat offerings continue to be popular
  • Forecasts point towards growth during the next couple of years
  • It is tapped into the largest online gaming market in the world

There are two main takeaways from the list. The first is that Tencent seems likely to recover and propel upwards from its setback last year. The 30% drop was actually caused by new government regulations which were rolled out to counter gaming addiction. However, the tech conglomerate has always had a positive relationship with the government – a major reason for their incredible success. Therefore investors have confidence that they’ll have no problem adjusting to the new regulations.

In fact, Tencent has already taken measures to protect young gamers as a sign of compliance.

The second takeaway is that the company is firmly seated in an extremely profitable market. First of all, China is home to the biggest online gaming community in the world. There are currently 600 million gamers in the country and that number is expected to grow. Hence, as long as Tencent play their cards right and put out great titles, they should be just fine.

Secondly, their incredibly popular chat platform WeChat is a goldmine waiting to be tapped. In 2020, Tencent rolled out ‘Mini Programs’ which work in conjunction with WeChat Pay. These Mini Programs allowed the latter to interact with vendors, for things like ordering food or renting bikes. Currently, more than 200 million people use these programs and the number is rapidly increasing.

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Ways to Buy Tencent Shares in Australia

Living in Australia, you have two ways to invest in an international company like Tencent. The first way is to buy shares from the Australian Securities Exchange (ASX) using a direct stockbroker. The second is to enter into Contract for Difference (CFD) trading with a broker like eToro.

Buying Shares vs CFD Trading

The former is very straightforward. You purchase shares of a company at the current asking price and as a result, own a percentage of the company. You earn a profit either through dividends or selling off your stake when the asking price shoots up.

CFD training is different, letting you trade on price fluctuations of a stock. One huge advantage of buying a CFD is that you only pay a fraction of the asking price. This is referred to as ‘trading on margin’ and it allows you to buy more than you typically would. The trade-off is that you don’t actually own any underlying shares.

For example, imagine Tencent has a margin rate of 10%. This is the percentage of the share asking price that you have to pay for a CFD. Hence, for the CFD equivalent of a $10,000 with of stocks, you’ll only have to pay $1000. If the stock experiences a 30% increase in value, you’ll make a $3000 profit on a $1000 investment.

The biggest downside is that losses can be quite high. This is because your total loss/profit is calculated on a value of $10,000 instead of $1000. Hence, if the asking price undergoes a 30% devaluation, you’ll end up losing $3000 on a $1000 investment.

Here’s a list of the advantages CFD trading has:

  • Less upfront investment due to trading on a margin
  • No need to actually borrow stock, meaning no borrowing costs
  • The CFD Market isn’t bound to Day-trading requirements
  • In addition to stocks, CFD is compatible with commodities, indices, and currencies as well.

Where To Buy Tencent Stocks in Australia

Regardless of which route you choose to take to purchase Tencent stocks, you need to go through a broker. Brokers have a significant impact on whether or not you actually make a profit.

When it comes to CFD trading, there are two brokers that we trust the most: eToro and Plus500. Both have excellent platforms which offer round the clock access to major international markets.

eToro is very popular because of its CopyPortfolios and CopyTrader systems. The former allows you to diversify your portfolio easily by providing easy access to a variety of trading instruments. CopyTrader is extremely useful for amateur investors. It’s an autopilot feature which allows you to replicate the investment decisions of more experienced traders.

Plus500, like a lot of CFD brokers, does not charge trading fees or withdrawal fees either. Instead, they make a profit when you pay the spread. Even though it may not have the same features as eToro, it’s perfect for those who want a simple, user-friendly platform for trading CFDs.

When choosing a broker/platform you must ensure that it checks all the right boxes. It should be easy to access global markets and instruments and also manage a diverse portfolio. Furthermore, there should be tools to guide amateur investors through the process.

These are the basics of buying Tencent stock while living in Australia. To recap, you need to start off by doing your research on the company. Thankfully, most of the indicators point to future growth. Afterward, you need to determine whether to purchase stock outright or enter CFD trading. The latter is great if you don’t particularly care about owning stocks and have less start-up capital.

7 Reasons to Buy Tencent Holdings Ltd (TCEHY) And Never Sell

The biggest name you’ve never heard of needs a place on your radar.

You can be forgiven if you’ve never heard of Tencent (OTC:TCEHY) . Until last year, I only vaguely knew of it as a technology player in China — but the details of what the company actually did were murky.

My view started to change — markedly — as I read about all of the well-known U.S. companies that Tencent was buying stakes in, including Tesla, Activision Blizzard, and Snap. Once my interest was piqued, I was sold. The company has quickly come to occupy over 3% of my real-life holdings, and I have plans to add to that stake over the coming years.

One-third of WeChat’s billion users are on the app for more than four hours per day. Image source: Getty Images

Here are my seven big reasons for being so excited by the company and its potential to create lasting wealth for my family.

1) The compass guiding all decisions

Most investors don’t bother to check out a company’s mission statement. I think that’s a big mistake. A well-written mission statement isn’t a guarantee for long-term success, but I do think it’s required for a company to have a chance at being a wealth-creating investment.

The best mission statements have three things in common:

  • They are simple enough to help guide an employee who has to make a difficult decision.
  • The goals are big enough that there are multiple avenues — and revenue streams — for accomplishing them.
  • They are inspirational far beyond “creating shareholder value.”

Tencent’s mission is:

“To enhance the quality of human life through Internet services.”

We’ll get to how Tencent is currently trying to do that below. But for now, it suffices to say that this easily checks all three of the required boxes of a great mission statement.

2) A founder-led company

I’m also a sucker for founder-led companies. If someone is just building organizations for the sake of getting rich, they would cash out immediately following a company’s IPO. For founders that stay on board, there’s much more at stake — often at an existential level. That means that the leader of a company is squarely focused on building something that will survive long after he/she is gone.

Tencent was founded by Ma Huateng — otherwise known as Pony Ma — in 1998. In the intervening twenty years, he has remained at the helm, and shows no signs of slowing down any time soon.

3) Management with skin in the game

Equally important, I like it when the founder has lots of his/her own skin in the game via stock ownership. Sure, they may not be in it just for the money, but it’s important to have something to lose, and stock ownership does that. It also helps guarantee that management has significant voting power if outside forces ever attempt to fundamentally change the company.

According to a recent CNN report, Ma has a stake of nearly 9% in Tencent shares.

4) Diversified businesses

Now we get to the meat of what Tencent actually does. In the beginning, a messaging system dubbed QQ was the workhorse. Since then, however, the company has found lots of ways to “enhance the quality of human life through Internet services.”

The most important piece right now is WeChat — a mobile application that has no peer here in the United States. It is part messaging system — voice, video, and text — part ride-hailing, part micro-social media, part payment systems. The app has over one billion followers, and one-third of those followers are on it for over four hours per day!

But it’s about more than just WeChat. Tencent is also the world’s largest gaming company, with games including Honor of Kings and League of Legends. Unsurprisingly for a company with such a reach, it also has a burgeoning advertising businesses as well. Here’s what growth has looked like:

Data source: Tencent IR.

5) A wide moat around the business

As impressive as that growth is, however, it wouldn’t mean much if Tencent didn’t have a moat around its various lines of business.

But investors can breathe a sigh of relief, because the company benefits from all four of the major moats a company can enjoy.

  • Brand: Last year, BrandZ announced Tencent as the only non-American company among the Top 10 most valuable global brands.
  • Network effects: A messaging and social media company is only as valuable as the number of users it has. WeChat has over 1 billion users — meaning non-users are incentivized to join, and it would be very difficult to replicate WeChat’s success.
  • High Switching-Costs: As Tencent’s payment option becomes more popular and WeChat is used for ever more functions, it will soon become a pain for Chinese citizens to do anything online without the app.
  • Low-Cost production: In this case, the “thing” being produced at a low cost is data. Tencent uses that data to offer targeted ads and grow its advertising business.

6) Future optionality

There’s really no telling what could be next for Tencent. The company’s mission statement and history prove that as long as a service could “enhance the quality of human life,” Tencent is willing to gamble on it.

The company is rapidly deploying AI services and has a growing cloud-computing division. Tencent announced a new program last year — Mini Programs — that essentially let other apps run on the WeChat app (creating apps within an app). And it’s hard to tell where the company’s aforementioned equity investments may take it, including its many smaller investments in homegrown (Chinese) businesses.

7) Incredible balance sheet strength

None of these ventures would mean anything, however, if Tencent didn’t have the financial fortitude to attempt to tackle such ambitious projects. On that front, however, Tencent has enviable strength.

Cash Debt Free Cash Flow
$48 billion $21 billion $15 billion

Data source: Tencent IR. Cash includes short and long-term investments. 1RMB = $0.16

Crucially, this cash balance does not include some of the more illiquid investments the company has made in some of its associates.

Take all of these things together and you have a company that — despite its $534 billion market capitalization and revenue growth of 56% over the past year — is still trading for a reasonable 36 times trailing free cash flow.

While the valuation may change over time, the seven strengths above have far more staying power. That’s why I think now is a good time to consider buying shares of Tencent and never selling them. My own skin is already in the game.

Share investing for absolute beginners

13 November 2020

To a first-time investor the share market can seem daunting. But it doesn’t need to be.

For most people, buying shares is not about trying to outsmart the market or get rich quick. Rather, it is about choosing companies that look likely to do well over the long term and whose shares should, subsequently, increase in value over time.

What is a share and how do I buy one?

At its simplest, a single share represents a single unit of ownership in a company.

Companies such as Commonwealth Bank of Australia, Rio Tinto and Woolworths are listed on the Australian Securities Exchange (ASX)—commonly known as the stock market or stock exchange. Although these big names are among the most well-known, more than 2,000 companies are listed on the ASX.

When you buy shares in one of these companies—even a very small number of shares—you then own a small part of that business.

You need to use a third party, called a ‘broker’, to conduct the actual transaction of buying or selling shares.

How can I make money from shares?

People aim to make money from investing in shares through one, or both, of the following ways:

An increase in share price. Usually known as ‘capital growth’ or ‘capital gain’, all this means is that you make money by buying your shares for one price and selling them for a higher price. Conversely, it’s important to remember that if the share price falls below the amount you paid and you sell your shares at this lower price, you would lose money.

A share in the company’s profits. Usually known as ‘dividends’, these payments are a portion of company profits paid out to shareholders, usually twice a year. Companies don’t have to pay dividends, but many see it as a way of returning earnings to their shareholders.

Isn’t my money safer in a savings account?

It’s true that savings accounts and term deposits are a less risky type of investment, and it is generally recommended you keep some of your money in these assets.

But investing in shares can give your money the chance to earn better returns than it would if you left it in a bank account.

Taking the first steps

Thinking about why you want to invest can help you work out your strategy and avoid making irrational decisions down the track. Ask yourself a few key questions:

  • How long do you want to put money into the stock market for?
  • How much are you going to invest?
  • Are you going to make regular contributions?

How do you learn to invest?

The sooner you start to get the knowledge you need, the quicker you can get to a point where you can feel confident.

It’s important to educate yourself about the economy, interest rates, exchange rates and government policy, and understand how these factors may affect a company’s performance, says the Australian Government’s MoneySmart website.

The ASX also has a share investing education section on its website.

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How much do you need?

Most brokers would require the first trade to be at least $500 which would be referred to as the ‘minimum marketable parcel of shares’. The size of Increments or additional purchases thereafter would be at the individual brokers discretion.

The ASX suggests you should “start your share investing with at least $2,000” as a general guide. Understanding the costs involved should help you decide how much you want to invest.

Starting small

When you buy or sell shares, each individual transaction incurs a brokerage fee in addition to the price of the shares themselves. This means the less you invest, the more the fees will be as a percentage of your total investment.

  • If brokerage costs you $19.95 and you buy $600 worth of shares, brokerage will represent just over 3.3% of your investment.
  • If brokerage costs you $19.95 and you buy $5,000 worth of shares, brokerage will represent 0.4% of your investment.

The point is, if you start with a small amount of money, the company you invest in may have to perform far above the average rate of return for you to make enough money to even cover your costs, let alone turn a profit, when you eventually sell your shares.

On the other hand, it is important to understand shares are considered the riskiest type of investment and the more money you invest, the more of your savings you are effectively opening up to that risk. You need to be comfortable with the possibility of losing the money you put into the share market.

How do you choose which shares to buy?

Researching and choosing companies to invest in can be enjoyable and there are lots of tips and recommendations to guide you through the process.

MoneySmart suggests starting with companies in an industry that you know something about, as this may make it easier for you to understand how a business is doing.

What to look for?

While past financial performance and achievements can be important indicators of the stability of a business, what really drives share prices is a company’s future outlook.

MoneySmart recommends asking questions like:

  • Will the goods and services this company provides be in demand in the future?
  • Are there opportunities for the company to grow?
  • Who are the company’s competitors and are they in a strong position?

Sources such as a company’s annual report, as well as its yearly and half-yearly financial results statements, can be good places to find relevant information. These can be found by searching for the company name on the ASX website.

Cheap but uncheerful

Cheap shares don’t always represent good value for money.

While ‘penny stocks’, for example, might look cheap at 10 to 20 cents per share, a small company with a shaky track record has the potential to wipe out your money fast.

Just because you can buy 5,000 shares at $0.20 each with your $1,000, doesn’t mean this is better value than purchasing 15 to 20 shares valued at around $60 per share. What matters when it comes to making money is not how many shares you own, but how much each share increases in value.

Be wary, too, of buying shares just because prices are falling. A company may have announced a profit downgrade or a change in its situation that materially damages its future chances of making money, which is causing its share price to fall.

Look at companies’ share price charts for a historical view of share value. If a share price has been falling over the long term, that company would probably be considered a high risk investment.

Not rising too quickly?

On the other hand, rapid and significant share price growth can also be cause for concern.

As mentioned above, share prices generally rise when a company makes a positive announcement about its future – for example, a contract for new business, a profit forecast or a sales outlook.

But if the share value grows too quickly and the company doesn’t deliver on its forecast, the prices might fall again as the shares become less desirable.

Basically, price is definitely important when choosing shares, but it should always be considered as part of a range of factors.

How much are you willing to lose?

Selling decisions are as critical as buying decisions to your results in the share market, MoneySmart notes.

Consider setting yourself a ‘percentage stop’ of around 15% for each company you buy shares in. This means deciding how much of your originally invested money you are willing to lose. Once a company’s share price falls below this amount, you commit to selling those shares. Otherwise, losses in one company may wipe out gains in the rest of your portfolio.

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