WeChat mascots are on display at a Tencent office at the TIT Creativity Industry Zone in Guangzhou, China, 9 May 2017
Bobby Yip | Reuters
Shares in Hong Kong’s Tencent tumbled on Monday after the Wall Street Journal reported that the Chinese tech giant could face a record fine for violating anti-money laundering rules.
The WSJ, citing people familiar with the matter, reported that WeChat Pay, a mobile payment service operated by Tencent, allows funds to be transferred for illegal purposes such as gambling. The newspaper reports that Tencent also did not fully comply with the rules regarding verification of the identity of sellers and individuals, as well as the sources of their funds.
Tencent was unable to immediately comment on the situation when CNBC contacted it on Monday.
Shares in the technology company fell nearly 10% to close at HK$331.80 ($42.38), the lowest close since December 5, 2019.
Since the record high close of HK$766.50 in January 2021., Tencent shares lost about 56%, losing more than $500 billion in company value.
The WSJ report comes after more than a year of intense regulatory tightening by Beijing in the country’s tech sector, which has sought to rein in power and stamp out some of the alleged misconduct by major tech companies. China has sought to introduce regulation in areas ranging from antitrust to data protection.
Non-banking financial players such as Tencent and Ant Group, a subsidiary of Alibaba, are receiving particular attention from regulators. These companies offer financial services, but traditionally without the strict regulation that banks face. China wants to change that.
So far, Tencent has managed to avoid a major regulatory blow, unlike Alibaba and Meituan, which have been hit with antitrust fines.
The Wall Street Journal reported that a potential Tencent fine could be at least hundreds of millions of yuan, but it is still under discussion.
Hong Kong-listed shares of other Chinese technology companies also suffered on Monday, as already fragile sentiment about the country’s internet sector continues to be tested.
China is facing a new wave of Covid infections across the country, leading to city lockdowns and factory closures. Meanwhile, investors are still worried about whether US-listed Chinese companies could face delisting and whether Beijing’s regulatory pressure will continue.