Tencent's charge to day after day of record highs has seen its performance diverge significantly from other Chinese stocks listed in Hong Kong and correlations between the two have fallen to their lowest in over a year.
** Talk of Alibaba's potential valuation, forecast-beating results from Facebook and Tencent's foray into mobile gaming has the Street excited.
** Stock is up 40% this year compared to the 3.5% decline for the HSI and the 16% drop for H-shares.
** Part of the attraction is that Tencent has sidestepped all the worries about China's slowdown that has hurt other sectors like financials, materials and industrials.
** Tencent features prominently among the top holdings for several China equity portfolios particularly among growth funds. With more active users in China than the population of Brazil, Tencent has certainly seen explosive growth in its home market.
** But valuations are lofty and the latest surge in shares has come on relatively light volume suggesting the move is being driven by retail and offshore investors simply adjusting allocations as growth elsewhere slows.
** At twice the broader Hong Kong market's P/E multiple, a low-volume ramp-up in share price as investors chase uncorrelated growth should be a cause for worry.