China’s Tencent Holdings saw its shares stage a partial rebound on Wednesday, along with rival NetEase whose shares shot up 10% compared with a 25% plunge on Friday. This was also helped by local media reports since Monday that it is again in talks to partner with World of Warcraft-maker Blizzard. The two companies abruptly parted ways a year ago.
The rise in Tencent shares was seen first day of trade after authorities vowed to make improvements to proposed rules that had sent stocks in video game companies plunging.
China’s regulator rules
Draft rules were published on Friday that seek to curb spending and the use of rewards that encourage the playing of video games, sparking fears that regulators were once again cracking down heavily on the sector.
But following dramatic tumbles in Chinese online gaming stocks, the China game regulator has struck a more conciliatory tone, saying it would improve the rules by “earnestly studying” public views. It then approved new licenses for 105 domestic online games for December – more than the average month.
“We believe these fire-quenching measures may help to slightly ease market concerns, but they are not enough to remove the overhang caused by the draft regulation,” Nomura analysts wrote in a note to clients.
The industry has only just returned to growth this year following the end of an extended clampdown in 2021 and 2022.
Tencent NetEase shares update
Shares in Tencent a tech behemoth which derives a fifth of its revenue from online gaming climbed more than 5% in morning trade after a 12% tumble on Friday. Hong Kong markets were closed on Monday and Tuesday for public holidays.
Rival NetEase shot up 10% compared with a 25% plunge on Friday, also helped by local media reports since Monday that it is again in talks to partner with World of Warcraft-maker Blizzard. The two companies abruptly parted ways a year ago.
NetEase, which gains 80% of its revenue from domestic online gaming.
Ban on online games
The draft rules, which are open to public comment until Jan. 24, seek to ban online games from giving players rewards if they log in every day, if they spend on a game for the first time or if they spend several times on a game consecutively. All are common incentive mechanisms in online games.
Though the move was a surprise to the industry and investors, it was in line with efforts by Chinese authorities to tackle myopia as well as internet and gaming addiction among young people.
In 2021, the government imposed a curfew for video game players who are minors and in August, China’s cyberspace regulator said children under the age of 18 should be limited to a maximum of two hours a day on their smartphones.
Other gaming stock update
Gaming shares traded on mainland China markets, typically smaller players in the industry, gained less. The Anime Comic Game Index edged up 0.4% on Wednesday, following a 15% slide over the previous three sessions.
Bilibili, a social media site that derived 17.1% of its total third-quarter net revenue from Chinese domestic gaming, climbed 2%. Its shares had tumbled about 10% on Friday.
A slew of the companies have announced share buybacks this week – plans seen as an attempt to reassure investors but the impact on boosting share prices has been mild at best.
