Investment banks still like one Chinese tech stock despite Beijing's crackdown

Published Thu, Aug 19 202111:26 PM EDT

As regulatory pressure from Beijing continues to weigh heavily on shares of China's tech giants, investment banks are continuing to see gains ahead for at least one internet titan. "A stock in the [technology, media and telecom] sector across China that you probably still want to be owning and looking at … albeit to a nimble point of view, would be Tencent ," Andrew Maynard, managing director and head of equities at China Renaissance, told CNBC's "Street Signs Asia" on Thursday. China Renaissance on Thursday maintained its "buy" rating on Tencent — meaning that it sees the Chinese internet giant outperforming the benchmark index in Hong Kong — with a price target of 725 Hong Kong dollars (about $93.04). That came after Tencent on Wednesday reported a better-than-expected 29% jump in second-quarter profit . In an earnings call, Tencent's president warned of more regulations ahead for the internet sector in China but expressed confidence that the company can be compliant. Chinese regulators have been clamping down on the country's technology titans for months, with new rules hitting everything from antitrust to data regulation . Tencent's stock has not been spared from the subsequent market carnage as investors scramble away from the sector. Its shares in Hong Kong are down more than 25% for the year as of the Thursday close. China Renaissance's Maynard sees uncertainty and volatility in the sector lingering in the short-term. "The regulatory pressures alone are so difficult to contain," he said. Meanwhile, investment bank Jefferies also sees gains ahead for Tencent's stock, but has a lower price target of 683 Hong Kong dollars ($87.65). "Tencent's evolution from consumer to industry internet, while retaining its solid foundation in gaming and growing its ad market share, paves the way for future success, in our view," Jefferies analysts wrote in a Thursday note. "We expect Tencent to maintain its leading position in the entertainment sector, with continuous leadership in online games and diversified business models," they said, adding that the firm's diversified model "shelters" it from macro-headwinds. — CNBC's Arjun Kharpal contributed to this report.

An Ubtech Walker X Robot plays Chinese chess during the 2021 World Artificial Intelligence Conference at the Shanghai World Expo Center on July 8, 2021 in Shanghai, China.

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As regulatory pressure from Beijing continues to weigh heavily on shares of China's tech giants, investment banks are continuing to see gains ahead for at least one internet titan.