(Bloomberg) -- China's Tencent Holdings Ltd. is ramping up buybacks as its Hong Kong-listed shares struggle to recover from a selloff that's wiped out about $309 billion in market value since early October.
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The Shenzhen-based technology behemoth has been repurchasing shares almost every trading day since mid-May, after it reported its slowest revenue growth in six quarters. At more than HK$9 billion ($1.1 billion) for June, the amount spent on buybacks is poised to be the biggest for any month this year, according to calculations by Bloomberg.
Tencent's shares have lost more than a third of their value since an October high, driven largely by concerns over how the WeChat operator will monetize its hefty investments in artificial intelligence. They have also been hurt by investors' growing preference for shares of pure-play AI model developers in China, which has left Internet and consumer companies on the sidelines.
"Investors are holding back — they want evidence that the money spent was worthwhile, but so far there hasn't been much proof," Agnes Ng, portfolio specialist at T. Rowe Price, said when asked about the underperformance by shares of internet firms. "The market is still waiting for them to re-monetize."
Tencent in March said it plans to at least double investments in AI to over 36 billion yuan ($5.3 billion) in 2026. This month, the firm started testing a new AI assistant for WeChat, known as Weixin in China, as part of efforts to catch up with local peers in the AI race. A successful introduction of enhanced AI services in WeChat, China's most popular messaging service with over a billion users, may be crucial in helping the firm monetize new technology.
The buybacks have likely played a role in easing the selloff, with Tencent's stock down 1.8% so far this month, versus a 10% slump in the Hang Seng Tech Index. Even so, a lower finish in June would mark a fifth straight month of declines for Tencent's shares, the longest losing run since 2018.
At 11.2 times one-year forward earnings on Friday, the stock's valuation hit its lowest level on record. That's cheaper than utility firm CLP Holdings Ltd., whose shares trade at more than 15 times.