Tencent Holdings Ltd. provides value-added services, online advertising services, and fintech and business services. It operates through the following segments: Value-Added Services, FinTech and Business Services, Online Advertising, and Others. The Value-Added Services segment is involved in online and mobile games, community value-added services, and applications across various Internet and mobile platforms. The FinTech and Business Services segment offers fintech and cloud services, which include commissions from payment, wealth management and other services. The Online Advertising segment refers to the display based and performance-based advertisements. The Other segment is composed of trademark licensing, software development services, software sales, and other services. The company was founded by Yi Dan Chen, Hua Teng Ma, Chen Ye Xu, Li Qing Zeng, and Zhi Dong Zhang on November 11, 1998, and is headquartered in Shenzhen, China.
COMMENTARY
Global equities rose in October, with the benchmark gaining 3.5%. The month featured broad regional strength but continued concentration in sector leadership, driven largely by Technology. Information Technology advanced 7% as semiconductor and hardware companies benefited from sustained investment in artificial intelligence and ongoing expansion in data-centre infrastructure.
Emerging Markets led performance, supported by strength across major Asian technology manufacturers that benefited from improving demand for memory and logic components. Japan also moved higher after Sanae Takaichi’s leadership win lifted expectations for fiscal stimulus and easier monetary policy. The United States delivered another month of gains, marking a sixth consecutive positive result and its longest advance since 2021.
More defensive, income-oriented sectors such as Consumer Staples and Real Estate declined as investors positioned for a lower-rate environment following the Federal Reserve’s late-month rate cut, its second this year. The decision, aimed at supporting a cooling labour market, contributed to a rotation away from more defensive, yield-oriented areas.
While AI-related spending continues to guide near-term market leadership, underlying economic conditions remained supportive, with inflation easing and demand improving across several regions.
Portfolio Commentary
The Fund returned 2.5% in October, trailing the benchmark’s gain. Relative performance was held back by the portfolio’s underweight position in semiconductor stocks, which continued to lead markets as investment in artificial intelligence expanded.
Results within Communication Services were mixed. Alphabet contributed positively after reporting strong third-quarter earnings across all major segments, supported by continued strength in its cloud business. Management also guided to higher capital spending next year, which reinforced confidence in long-term AI-driven growth.
By contrast, Meta Platforms reported solid revenue growth, but its shares declined as margins contracted due to higher AI-related investment. The company outlined a substantial multiyear capital expenditure plan, largely to be financed through debt, which weighed on sentiment. These developments highlight both the opportunities and the rising capital intensity associated with hyperscaler investment.
During the month, the Fund initiated a new position in Fabrinet, a Thailand-based contract manufacturer specialising in optical communications components. The company operates within a niche where customers own the designs and specify component inputs, while Fabrinet executes the manufacturing process. Its competitive advantage is built on cost leadership and technical expertise in a relatively low-cost region.
The company has delivered steady revenue growth since 2005, supported by the expansion of optical communications infrastructure and rising demand for high-bandwidth applications such as cloud computing, AI and video streaming. The team expects these trends to continue underpinning Fabrinet’s long-term growth as it invests in additional manufacturing capacity and strengthens its operational edge.
Attribution effects varied across sectors. In Financials, Progressive, the US-based auto insurer, detracted after reporting slower auto policy growth and recording a charge linked to Florida regulations requiring refunds of excess profits to policyholders. In Communication Services, Netflix declined after third-quarter revenue and subscriber results met expectations but fell short of investor hopes, while profit was affected by a tax-related charge in Brazil. China-based Tencent, the online gaming and social media platform, also weighed on returns amid renewed tariff tensions.
Within Information Technology, Fabrinet contributed positively, although the portfolio’s underweight exposure to semiconductor stocks limited relative performance.
The portfolio remains positioned in high-quality companies with sustainable growth drivers and strong balance sheets, and the team continues to apply its disciplined, bottom-up approach.