What’s up?

Web services and gaming provider Tencent Holdings announced that it plans to lay off about 10% of its senior managers. The company won’t cut the number of positions: it wants to swap existing managers for younger executives. Tencent declined to comment on the news.

Why is it important?

In general

The recent concerns about global growth slowdown are having a negative impact on business all over the world and in China in particular. Trade wars between China and the United States aggravate the situation.

In these circumstances, companies have to consider all steps that may improve the situation. Take into account the fact that out of 2,000 senior managers of Tencent fewer than 10 were below 30. It seems that the change has been long overdue.

For investors

The restructuring is aimed to help the company fight slowdown in growth. Life definitely isn’t easy for Tencent. Chinese regulators froze gaming approvals for nine months in 2018. User growth of the company’s flagship WeChat platform is also losing pace. That may explain why the social media giant is expected to report a 16% drop in earnings in Q4. The company will publish its financial results on Thursday. Tencent started a big reorganization in October focusing on introducing services for corporate clients. Now it is trying to make staff shifts and become more results-focused. However, it will take time before the effect of these changes manifests itself.

For traders

The publication of the earnings report will surely bring volatility to the stock. The price has been rapidly gaining during the recent days, so weak earnings will lead to a selloff. Support is provided by the 100-week MA at 352 and the uptrend support line at 347. Confident message from the company can make the price try to keep moving up to resistance that lies at 375 and 390.

Tencent, weekly chart