Naspers & Prosus investor sentiment warms up in 2024

Investor sentiment for Naspers and Prosus appears to be warming up in 2024, despite the regulatory uncertainty in China's technology sector and the economic clouds looming over the country. Amplify Investment Partners believes that both Naspers and Prosus present good value at current levels and that the recent market reaction may have been overdone. Nico Janse van Rensburg, Head of Positioning at Amplify Investment Partners, shared insights on why the firm sees potential in these two stocks. Naspers has seen a gain of almost 10% since January, while Prosus has also shown an uptick, up over 7% at the present moment. According to Janse van Rensburg, many boutique managers have included Naspers and Prosus in their portfolios due to the underlying valuation case for Chinese equities, particularly in the tech sector. He highlighted the buying opportunity created by the market's overreaction to the regulatory uncertainties in China's gaming industry, which led to some managers increasing their stake in the companies post the December 2022 sell-off. Janse van Rensburg emphasized that the earnings from Naspers, especially from its gaming division, remain positive, with a significant portion of profits coming from the Chinese market. The recent backtracking of authorities on some regulations in the gaming sector has also reduced regulatory risks, making Naspers and Prosus more attractive to investors. Despite the challenges posed by the Chinese regulatory environment, Janse van Rensburg believes that the government's recent supportive stance towards the gaming industry indicates a positive outlook for companies like Naspers and Prosus. The market had previously expected a massive opening in China, which did not materialize, leading to a more cautious approach to investing in Chinese stocks. However, with the regulator showing signs of support for the gaming sector, concerns around regulatory risks have eased. The approval of new games and the regulator's shift in approach post the draft regulations reflect a more favorable environment for the gaming industry, which is a key profit driver for Naspers and Prosus. As both counters continue to show positive growth since the beginning of the year, Amplify Investment Partners remains optimistic about the potential for Naspers and Prosus in 2024. As the Chinese market stabilizes and regulatory uncertainties ease, these companies could offer significant value to investors looking to capitalize on the opportunities in the tech sector.