CHINA’S two largest companies have lost a combined US$140 billion in market value since the escalation of the trade war in May. As Alibaba Group Holding Ltd. and Tencent Holdings Ltd. report earnings this week back-to-back, they’ll try to show the punishment is overdone.

The brutal market selloff began three months ago as Donald Trump’s administration slapped restrictions on Chinese national champion Huawei Technologies Co. The Hong Kong benchmark has slid over 10 percent, with the two giants dropping by similar amounts.

Yet Alibaba and Tencent’s businesses are largely domestic, having little to do with the United States or trade. Tencent is back on track after a horrendous 2018, with revenue growth projected to rebound to 27 percent in the June quarter thanks to hits like Peacekeeper Elite and durable titles like Honour of Kings. Alibaba, coming off a record June online promotional blitz, is expected to report revenue growth of 38 percent.

“Despite growth concerns, a few China Internet companies have performed quite well recently, especially in e-commerce and gaming,” said Jerry Liu, a Hong Kong-based analyst at UBS.

Alibaba, in particular, needs a strong quarter when it reports today. The e-commerce giant is weighing a secondary listing in Hong Kong that could raise as much as US$20 billion, though the target is in flux. Shares are down by about 12 percent over the last year, while its price to earnings ratio, based on financial estimates for the next 12 months, is about 24, compared with Amazon’s roughly 70.

Raising capital could help replenish ammunition for the e-commerce giant, currently engaged in a cash burning battle for on-demand and food delivery services with Meituan. It’s one of the areas where Alibaba is struggling. Alibaba’s Ele.me’s market share may have lost another 2 percentage points in food delivery to 36 percent in the second quarter compared with three months ago, according to David Dai, a Hong Kong-based Bernstein analyst.

The worst seems to be behind for Tencent. After a year of not being able to monetize its most popular gaming genre, the social media giant has finally won regulatory approval to make money from its latest title, Peacekeeper Elite. The new battle game, where players engage in a fight to the death, has been toned down in violence.

That said, regulator approval rates for games have slowed down. (SD-Agencies)