Tencent Holdings will pay 450 million yuan (US$69 million) for a 4.6 percent stake to become the largest institutional investor in Huayi Brothers Media Corp, China's biggest listed filmmaker.

The investment will allow Tencent to tap the growing demand for higher quality films as well as online videos, according to Huayi Brothers' filing to the Shenzhen Stock Exchange yesterday.

"The investment in Huayi Brothers is a strategic partnership that will allow both sides to combine the film industry and the new media sector," Liu Chiping, president of Tencent, said in a statement.

Huayi Brothers' shares surged 8.5 percent to 15.80 yuan yesterday.

"Huayi Brothers is shifting from production of films, TV series and artists' agent service to new business sectors, including distribution of content and derivative products, and it's a trend to combine the entertainment industry and the new media sector," said Wang Zhongjun, chairman of Huayi Brothers.

"Tencent's rich experience in customer service and product innovation will provide synergies for both companies in our future development," Wang added.

Alibaba Group Chairman Jack Ma, director Feng Xiaogang and six other media tycoons have sold more than 24.49 million shares in Huayi Brothers after a lock-up period, according to a separate statement.

In China, the advertising market in the online video sector nearly tripled to 2.17 billion yuan in 2010.