What's going on?

Tense times for Tencent: the Chinese internet giant stepped into the spotlight on Wednesday and delivered fluent earnings � but it stumbled when it came to sales growth.

What does this mean?

Tencent�s revenue was up 20% last quarter compared to the same time last year � not bad, but still its smallest rise since 2019, with the Chinese government�s expanding tech crackdown likely hitting Tencent�s mobile gaming empire.

A $3 billion gain on its investment portfolio meant profit nevertheless grew by a better-than-expected 29%. Come its next set of quarterly results, however, Tencent might be announcing investment losses. The company is a big backer of Chinese for-profit education startups like Yuanfudao and VIPKid � and a radical overhaul of the industry last month banned such firms from, er, making a profit. Not only is that likely to undercut their valuations, but Tencent may now be stuck with these unattractive unlisted shares: with China�s new rules also banning such companies from �going public�, its only way out is to find some other sucker private investor to sell them to.

Why should I care?

For markets: Tencent none the richer.
Tencent�s own share price is down more than 40% from the all-time highs it hit in February. While the company isn�t being specifically targeted, its outsized influence in the modern Chinese economy has left it vulnerable to a government crackdown that�s rapidly expanded to cover data security and online content. Worried investors around the world have been selling the company�s stock as a result.

The bigger picture: There�s a new king in town.
With tens of billions of dollars knocked off Tencent�s market capitalization, it�s no longer Asia�s most valuable company: that crown now belongs to TSMC (tweet this). The world�s largest contract manufacturer of microchips has been reporting bumper profit recently thanks to the global chip shortage, and investors have sent the Apple supplier�s stock up accordingly.