Samsung, Tencent vie for Asia’s valuable firm title

South Korean conglomerate Samsung and Chinese investment firm Tencent Holdings Ltd are racing to be crowned Asia’s most valuable company as exp-ectations for robust earnings growth push their share prices to record highs.

Their surge — both have gained by a third this year — has made them the world’s best performing large-cap tech stocks and highlights how these nimble Asian firms are thriving while rivals Apple and Alibaba have struggled.

Tencent is a Shenzhen-based Chinese investment holding company whose subsidiaries provide media, entertainment, internet and mobile phone value-added services and operate online advertising services in China.

“These companies can grow earnings despite weaker global growth,” said Andrew Gillan, head of Asia ex-Japan equities at fund managing firm Henderson Global Investors, which is overweight on Asian technology firms.

“The operating fundamentals of the Chinese internet sector particularly have surprised positively in the most recent quarterly results.”

While many investors remain upbeat about Samsung and Tencent, some caution the firms are vulnerable to rapid swings in sentiment on any sign of slowing momentum. Samsung and Tencent have been more volatile than the Asia tech sector.

On Wednesday, Samsung said sales of its latest flagship smartphone were out-stripping supply, but second-half profits could still take a hit if production shortfalls are not fixed and a recovery in components demand fails to eventuate.

Moody’s Investor Service also warned that Samsung’s profit margins might narrow in the second half because of seasonal factors in the consumer electronics business and competitive pressures.

For Tencent, the market expectations that are driving shares higher are themselves a risk, according to Nomura.

A faster-than-expected slowdown in personal computer game revenue, aggressive spending and new products or business models from competitors could weigh on earnings, the bank warned.

Samsung and Tencent have added about $30 billion in market value since Thursday, surging to all-time highs. Tencent is valued at $249 billion, only 4 percent smaller than the most valuable Asian firm, China Mobile, at $259 billion. Samsung is now worth $239 billion.

Tencent is now the world’s 12th-biggest company by market value and Samsung the 17th-largest, Thomson Reuters data shows.