What happened
Shares of Sea Limited (SE -0.69%), a digital entertainment and e-commerce company, spiked today as the broader market rose and as shares of some Chinese stocks soared. Sea Limited is based in Singapore, but the Chinese tech giant Tencent Holdings owns an 18.7% stake in the company.
Sea limited's stock was up by 12.1% as of 1:16 p.m. ET.
So what
The broader market was making gains for its second straight day today, with the S&P 500 up 1.6% as of this writing. While positive investor sentiment in the market may have helped to lift Sea's share price a bit today, the biggest factor likely comes from Tencent's share price spike.
Image source: Getty Images.
Because Tencent owns a significant stake in Sea, when its share price rises it can cause investors to be optimistic about Sea as well.
And boy is Tencent's share price rising today. The Chinese tech giant's stock was up by 26% today after the Chinese government indicated that it would work with American regulators to help keep Chinese stocks listed on U.S. exchanges.
The backstory here is that the Securities and Exchange Commission (SEC) recently said five Chinese companies were not complying with the Holding Foreign Companies Accountable Act, which says that foreign companies must provide the SEC with audited financial records for three consecutive years.
Companies that aren't in compliance can be delisted from U.S. stock exchanges. The potential for those five companies to be delisted has sent Chinese stocks tumbling recently.
But with news that the two countries appear to be working together to make sure Chinese stocks stay on U.S. exchanges, Tencent Holdings' share price is soaring -- and taking Sea's stock along for the ride.
Now what
Both Sea Limited's and Tencent's huge share price gains today are a good example of how volatile the market is right now. While today's gains are clearly good news for investors, it's probably best to prepare for more share price swings.
Investors are still processing news about the conflict in Ukraine, sky-high inflation, interest rate hikes by the Federal Reserve, and high gas prices. With so much uncertainty right now, Sea investors should likely expect some more market instability, at least for a little while.
