Tencent Stock Rebounds as Regulatory Stance on Gaming Appears to Ease

In a reassuring turn for investors, Tencent Holdings, a major player in the Chinese tech landscape, experienced a notable recovery in its shares on Wednesday. 

This followed a significant downturn spurred by the release of draft rules on Friday aimed at regulating the video game industry. 

These rules proposed measures to control spending and the distribution of incentives within games, causing concerns about a renewed crackdown by regulators.

The regulatory body overseeing video games in China, the National Press and Publication Administration, has since adopted a more cooperative stance. 

They expressed their commitment to refining the proposed rules by carefully considering public feedback. 

Notably, the administration granted approvals for 105 new licenses for domestic online games in December, a number surpassing the monthly average.

While this gesture from regulators was seen as a potential alleviation of market concerns, analysts at Nomura cautioned that it might not entirely dispel apprehensions caused by the draft regulations. 

The gaming industry in China, having recently emerged from a prolonged period of regulatory constraints in 2021 and 2022, has just begun to show signs of growth.

Tencent, a tech giant deriving a significant portion of its revenue from online gaming, witnessed a bounce of more than 5% in morning trade. 

This recovery followed a 12% decline on Friday. Notably, the Hong Kong markets had been closed for public holidays on Monday and Tuesday.

Rival company NetEase also experienced a positive shift, with shares surging by 10% compared to a 25% drop on Friday. 

This recovery was further fueled by reports suggesting renewed talks between NetEase and Blizzard, the maker of World of Warcraft. 

The companies had abruptly ended their partnership a year ago, and recent media speculation indicated a possible rekindling of collaboration.

Blizzard China, the Chinese subsidiary of Blizzard, disclosed ongoing discussions with publishing partners in China to ensure the continued service of the popular game in the country. Neither NetEase nor Blizzard responded to Reuters’ requests for comments.

The draft rules, currently open for public commentary until January 24, aim to prohibit online games from offering rewards to players for daily logins, first-time spending, or consecutive spending. 

These proposed restrictions align with broader efforts by Chinese authorities to address myopia, internet addiction, and gaming addiction among the youth.

In 2021, the government imposed curfews for minor gamers, and in August, the cyberspace regulator limited smartphone usage for children under 18 to a maximum of two hours per day.

While major players like Tencent and NetEase saw substantial rebounds, gaming shares on mainland China markets, typically representing smaller industry players, exhibited more modest gains. 

The Anime Comic Game Index showed a marginal increase of 0.4% on Wednesday, following a 15% decline over the previous three sessions.

In response to the market turbulence, several companies within the industry announced share buyback plans as a means to reassure investors. 

However, the impact of boosting share prices has been minimal at best, signaling the lingering uncertainty surrounding the regulatory landscape for the Chinese gaming sector.

Source: image.cnbcfm

David Huner
David Huner
David Huner is a tech lover. After completing his graduation from the University Of Phoenix, he started gather his knowledge mostly on latest technologies that keeps his life smart and cool. Now he wants to spread his knowledge with people who loves technologies.

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