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Tencent CEO Ma Huateng ‘Pony Ma’ is now the richest man in China

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Tencent started making money through advertising and monthly fees for premium QQ chat users. By 2001, the company had raised over $32 million in investments and, in 2004, it went public in Hong Kong. Then, in 2011, Tencent debuted its mobile-only messaging app WeChat as a separate entity from QQ. It has since been dubbed “the one app to rule them all.”

WeChat is often compared to Facebook because of its ubiquity in China, where Facebook is banned along with its messaging service WhatsApp. But WeChat’s “super app” model also goes even further than Facebook for its nearly 1 billion monthly active users, allowing them to text, call, play games, send money, shop, pay at restaurants, hail cab rides and even engage in online dating.

Tencent has branched out successfully into other arenas as well, such as cloud providers, artificial intelligence ventures and entertainment. Epic Games, a subsidiary of Tencent Games, produces the massively popular battle royale game “Fortnite.” Tencent is now spending $15 million to bring it to China, according to Variety. Even without that lucrative market, “Fortnite” has been a phenomenon: It reportedly made $126 million in February just through in-app purchases.

Tencent has also made investments in an array of Western companies: It has a 5 percent stake in Tesla and a 10 percent stake in Snap, and, reportedly, arranged a 10 percent stock swap with Spotify.

Last year, Tencent became the first Asian tech firm to be valued at over $500 billion and is now Asia’s most valuable public company.

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Lockdowns after China’s new Covid-19 outbreak impact steel, iron ore

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This aerial image taken on June 6, 2019 shows a steel factory in Chengde, China’s northern Hebei province.

FRED DUFOUR | AFP | Getty Images

SINGAPORE — A new wave of Covid-19 cases in China’s Hebei province triggered transport restrictions in the major steel-producing region.

The lockdowns in Hebei include areas surrounding steel mills, limiting the ability to transport the metal to customers. China is the world’s top steel producer and analysts say Hebei contributes over 20% of the country’s total output.

Coronavirus cases in Hebei have been rising since the start of the year, prompting the province to lock down its capital, Shijiazhuang, and at least two other areas in an effort to contain the spread of the coronavirus.

The curbs are unlikely to affect steel production for now, but they could hurt demand by spurring the manufacturing sector to stop work earlier than planned ahead of the major Lunar New Year holiday, commodity data provider S&P Global Platts said earlier this month.

Demand and prices for raw materials used to make steel like iron ore could also shoot up, according to analysts.

Restrictions in Hebei

Steel deliveries by truck have been suspended in Hebei, leaving rail as the only way to transport steel, Shanghai-based Chinese metal data provider Mysteel said in a note last week. The report said blocked roads have led to completed steel piling up at major mills in the region.

“Partial lockdowns have restricted the transportation of goods, resulting in a sharper build in inventories held by local steel mills rather than at stockists in the first half of January,” said Atilla Widnell, co-founder of Singapore-based Navigate Commodities, in an email to CNBC on Monday.

“We have heard anecdotal evidence that some stockists and traders are reluctant to tie up cash flow in-case a ‘soft lockdown’ is prolonged or intensified,” he added.

S&P Global Platts said inventories are rising at the Jingye Iron & Steel mill in Hebei’s capital city Shijiazhuang. The firm cited a source at the mill, which produces 13 million metric tons of crude steel a year.

Manufacturing, construction sectors stopping work

Manufacturing and construction sites in China are set to stop work earlier than usual ahead of the Lunar New Year holiday between Feb. 11 and 17. That’s likely to hit demand for steel, which is heavily used in those sectors.

The government advised manufacturing and construction workers to return home before the peak holiday travel period, said S&P Global Platts.

“According to market sources, Beijing has done this in (an) effort to reduce the possibility of a spike in COVID-19 cases during and after the Lunar New Year holidays,” the firm wrote.

Work stopping earlier suggests steel demand is set to drop, causing inventories to rise elsewhere.

“Some traders said they were unwilling to increase their steel inventories as they anticipate having to hold on to these for much longer than usual, and with steel prices continuing to soar, building inventories will put pressure on their cash flows,” S&P Global Platts added.

Impact on steel, iron ore

Daniel Hynes, senior commodity strategist at Australian bank ANZ, told CNBC on Monday that risks could spread to iron ore.

“There are concerns that a further rise in coronavirus cases in Hebei could result in some steel making regions being locked down. This would obviously impact demand for iron ore, as steel mills would likely see supply chains disrupted, thus impacting steel production,” he said in an email.

The ripple effects can already be seen in the costs for raw materials used to process steel like coking coal, said energy research consultancy Wood Mackenzie.

Coking coal prices are surging and are about 450 yuan per ton higher than last year, according to Zhilu Wang, research associate at the firm.

“This is due to the restrictions on inter-provincial transportation in Hebei provinces which has resulted in the increase of transportation fee,” said Wang.

While this could in turn support steel prices, Wang predicted it could mildly weaken overall as traders stock less of the commodity due to the Covid uncertainty.

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China loan prime rates, coronavirus, currencies

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SINGAPORE — Stocks in Japan were set to trade higher at the open as investors in Asia-Pacific wait for the release of China’s latest benchmark lending rate.

Futures pointed to a higher open for Japanese stocks. The Nikkei futures contract in Chicago was at 28,755 while its counterpart in Osaka was at 28,700. That compared against the Nikkei 225’s last close at 28,633.46.

Meanwhile, shares in Australia edged higher in early trading, with the S&P/ASX 200 up about 0.5%.

In Southeast Asia, stocks in Malaysia will be closely watched following reports that almost all states in the country will be placed under Movement Control Order from Friday as the government seeks to curb the spread of the coronavirus.

Investor focus on Wednesday will likely be on China’s benchmark lending rate, expected to be out at around 9:30 a.m. HK/SIN. A majority of traders and analysts in a snap Reuters poll predict no change to either the one-year loan prime rate (LPR) or the five-year LPR, which were last sitting at 3.85% and 4.65%, respectively.

Currencies

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 90.476 following an earlier high above 90.7.

The Japanese yen traded at 103.87 per dollar, having weakened from levels below 103.8 against the greenback yesterday. The Australian dollar changed hands at $0.7706, still off levels above $0.775 seen last week.

Here’s a look at what’s on tap:

  • China: One year and five year loan prime rates at 9:30 a.m. HK/SIN

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From Jeep to Maserati, Stellantis to rollout 10 new EV models in 2021

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