(Bloomberg) — Tencent Holdings Ltd. fell Tuesday, after a world-beating surge in the stock pushed its market value to the cusp of $1 trillion for the first time.The Chinese Internet behemoth lost as much as 5.1% in Hong Kong, its biggest decline in a month, putting its market capitalization at $900 billion. Its shares surged 11% Monday, Tencent’s best gain since 2011. There were few obvious catalysts for a rally of that size, although traders cited an ambitious listing plan from video startup Kuaishou Technology, in which Tencent holds a stake, as well as a bullish note from Citigroup Inc. analysts. The options market went wild, with one contract expiring Thursday soaring 118,300%.Tencent was the most recent mega-cap company to benefit from investor enthusiasm for the tech sector, with its looming milestone a marker for the euphoria sweeping the stocks globally. Before Tuesday, the stock had added $251 billion in January alone — by far the biggest creation of shareholder wealth worldwide. Warnings are rising that easy monetary policy is fueling bubbles in global equities, especially in the U.S., where gains have been led by the Nasdaq.As investors seek cheaper alternatives, they’ve piled into Hong Kong equities. That’s helped make the Hang Seng China Enterprises Index the best performing among the world’s major benchmarks in the past month. Adding fuel to the rally has been record inflows by mainland Chinese investors into the city’s equities. Tencent, whose WeChat social-media platform boasts more than a billion users, is the prime target, accounting for about a quarter of total cash coming in through the stock links.“Stocks are overshooting,” said Jackson Wong, asset management director at Amber Hill Capital Ltd. “Obviously this has been driven by liquidity. Beijing wants to drive money into Hong Kong, and it’s encouraging lots of new ETFs and mutual funds to buy the city’s stocks.”On Tuesday, 10-year government bonds slumped to fall by the most in four months after China’s central bank drained funds from the system, raising concerns about how much further Hong Kong’s stocks could rally given tightening liquidity.While Tencent has long been an investor favorite in Asia, returning more than 100,000% since its 2004 initial public offering, the stock is not without risk.In 2018, a government crackdown on China’s online gaming industry squeezed Tencent’s most profitable business, which at the time accounted for about 40% of its revenue. Coupled with a slowing Chinese economy and a weakening yuan, Beijing’s nine-month halt on approvals for new games contributed to a 22% slump in the shares.A campaign against monopolistic practices since late last year has targeted many of the industries in which Tencent and rival Alibaba Group Holding Ltd. operate, including the online payments industry. But while increasing regulatory risk has left Alibaba’s shares about 16% lower than their October peak, Tencent has closed at seven fresh records in the past eight sessions. One factor contributing to the divergence: Alibaba’s Hong Kong stock is not included in trading links with mainland exchanges.Tencent would be the second Chinese firm to join the trillion-dollar club after PetroChina Co., which was briefly worth more than that in late 2007 before collapsing in value. U.S. tech giants Apple Inc., Amazon.com Inc., Alphabet Inc. and Microsoft Corp. are also worth more than $1 trillion each, as is Saudi Arabian Oil Co.Tencent was founded in 1998 by four college classmates and a friend from Shenzhen who devised a Chinese version of the instant messaging service ICQ. Led by “Pony” Ma Huateng — ma is Chinese for “horse” — the company’s chat software became the primary communication tool for a generation of young Chinese.Tencent reported net income of 38.5 billion yuan ($5.9 billion) in the three months ended September, boosted by a gain of 11.6 billion yuan from rising valuations for its investments in other companies. The rally in tech shares is likely to lift its earnings further, given its ownership of some of the industry’s largest players from JD.com Inc. and Meituan to electric vehicle maker NIO Inc.Still, Tencent’s surge has outpaced all but the most bullish analysts’ forecasts. The stock’s closing level of HK$766.50 on Monday was almost 10% higher than the consensus 12-month price target compiled by Bloomberg, the widest gap since 2014.(Updates market price in paragraph 2)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.