Cy Jacobs loves Naspers and Prosus

36ONE Asset Management founder and director Cy Jacobs is upbeat about Tencent, and, therefore, Naspers and Prosus.

Jacobs told delegates at the 2024 Biznews Conference in Hermanus that they are bullish about China after many years of being negative about the country.

He said while there are sectors in the Chinese economy which are negative, like property, other sectors are looking attractive for investors.

“The Chinese tech companies are not that far behind the United States. They are, however, much cheaper based on valuations,” he said.

The rapid repeal of new regulations, which impacted the market, made Jacobs and 36ONE Asset Management bullish about China.

“In December, China announced new regulations regarding mobile gaming. The market reacted negatively, with Tencent and related companies taking an immediate hit,” he said.

“Within 24 hours, those regulations were removed, the minister was removed, and all the rhetoric around it was changed.”

“For the first time in many years, China paid attention to what the stock market did. Since that day, the rhetoric from China changed.”

Jacobs said China needs to grow again, and they cannot achieve it where they did before. “It needs to be done domestically and by consumption.”

“China needs to promote the tech sector and we think there has been a fundamental shift,” he said.

He is particularly bullish about Tencent and in turn, Naspers and Prosus, which own a large stake in the Chinese tech company.

Tencent is doing a buyback, which is four to five times larger than previously. This shows that they know how much growth is yet to come.

Prosus, which holds a large Tencent stake, is also doing a buyback. Naspers, which holds a large Prosus stake, is also doing a buyback.

Jacobs said you have an automatic tailwind. This is why our biggest overweight position in South Africa is Prosus and Naspers.