The logo for Tencent Holdings Ltd's WeChat app is arranged for a photograph on smartphones in Hong Kong, on Aug 7, 2020. (PHOTO/BLOOMBERG)

Tencent Holdings Ltd slumped after a world-beating surge in the stock pushed its market value to the cusp of US$1 trillion for the first time.

The Chinese internet behemoth lost 6.3 percent in Hong Kong on Tuesday, putting its market capitalization below US$890 billion. Traders took profit after Monday’s 11 percent surge, which was Tencent’s biggest in almost a decade. Adding caution were comments by an advisor to China’s central bank to local media indicating that excessive liquidity and ultra-low borrowing costs were creating bubbles in the stock market.

Investors were cautious following comments by an advisor to China’s central bank to local media indicating that excessive liquidity and ultra-low borrowing costs were creating bubbles in the stock market

Onshore funds purchased a record amount of Hong Kong shares this month, with about a quarter of that targeting Tencent. As more than a billion people use its WeChat social-media platform, Tencent is ubiquitous to Chinese mainland investors who have no access to Hong Kong shares of rival Alibaba Group Holding Ltd through the stock links.

READ MORE: Tencent’s US$251b rally triggers frenzy in shares, options

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 US$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 US, where gains have been led by the Nasdaq.

As investors seek cheaper alternatives, they’ve been piling 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.

While Tencent has long been an investor favorite in Asia, returning more than 100,000 percent since its 2004 initial public offering, there are other risks to the rally.

READ MORE: Mainland cash boosting HK stocks sales after record year

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

A campaign against monopolistic practices since late last year has targeted many of the industries in which Tencent and rival Alibaba operate, including the online payments industry. But while increasing regulatory risk has left Alibaba’s shares about 16 percent 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. US tech giants Apple Inc, Amazon.com Inc, Alphabet Inc and Microsoft Corp are also worth more than US$1 trillion each, as is Saudi Arabian Oil Co.

ALSO READ: Tencent's record rally can't lift Hang Seng out of doldrums

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.

Still, Tencent’s surge has outpaced all but the most bullish analysts’ forecasts. The stock’s closing level of HKUS$766.50 on Monday was almost 10 percent higher than the consensus 12-month price target compiled by Bloomberg, the widest gap since 2014.