Chinese online gaming behemoths Tencent Holdings Ltd TCEHY and NetEase Inc NTES saw their shares rally after Chinese regulators indicated a possible revision of the proposed regulations that had earlier caused gaming stocks to plummet.
What Happened: Tencent’s shares in Hong Kong surged by 3% following a 12% slump last Friday, while NetEase’s shares soared 14% during morning trade, rebounding from a 25% drop, as reported by Reuters
China’s video gaming regulator, the National Press and Publication Administration (NPPA), announced a series of draft rules last Friday aimed at curbing in-game spending and rewards. The announcement sparked fears of a renewed crackdown on the sector, leading to a sharp decline in gaming stocks.
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However, a statement released by the NPPA on Saturday indicated a potential revision of the proposed rules based on public feedback. On Monday, the regulator greenlit 105 new licenses for domestic online games for December, a move interpreted by analysts as a strong sign of the government’s continued support for online games despite recent regulatory pressures.
Why It Matters: The initial proposed regulations were expected to hit smaller developers the hardest, potentially leading to a decline in overall online advertising revenue. The rules disapproved daily sign-ins for games and other revenue-generating practices.
In response to investor concerns following the market disruptions caused by these regulations, several smaller Chinese gaming companies announced plans to buy back shares.
The NPPA’s approval of 105 online games amid the significant financial losses experienced by major gaming companies is seen as a positive signal for the industry. The approved games included “Counter War: Future” from Tencent and “Firefly Assault” from NetEase.
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