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 2017, the stock price experienced an acceleration and in early 2018, 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.
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 2017, 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.
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.
Also read: How To Buy Apple 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.