Social Media Giant Tencent Gets Into Investment Banking

Tencent, operators of WeChat announced a $372 million USD investment into the China International Capital Corporation (CICC).

This investment will give Tencent almost a 5% ownership of the oldest investment bank in China while also making it the third largest shareholder of the corporation.

Following the announcement of Tencent’s investment last Wednesday, CICC’s share price shot to an all-year high of HK $18.48. Tencent’s share price on the other hand only rose marginally by 0.2% to HK$347.2.

CICC was set up in 1995 as the first Sino-foreign joint venture investment bank in China. New York-based investment banking giant Morgan Stanley was one of the majority shareholders until 2010 when they sold their stake in the business. In 2007, CICC became one of the first investment banks in China to set up a wealth management division.

Tencent’s investment appears to be a competitive strategy to battle Alibaba for dominance in the wealth management industry. The two giants already have a rivalry in the mobile payments space. With Alibaba’s Ant Financial recent expansion into wealth management, an investment in CICC seems like the best counter move for Tencent.

For CICC, this strategic partnership is a perfect opportunity to leverage Tencent’s data and network to gain more clients and also provide a more personalized service.

The partnership “will enable the company to enlarge its customer base and provide more personalized and diversified wealth management products and services for customers,” CICC said in a stock exchange announcement.

Tencent started out as an online gaming platform but their big break came from the massive success of WeChat. WeChat presently has over 930 million active monthly users.

What do you think about Social Media giants getting into traditional and less innovative businesses?