Why Are Tencent And NetEase Shares Up Today? Hint: It Has To Do With Chinese Goverment Gaming Regulations

China's gaming regulator has removed proposed rules from its website that aimed at curbing spending and rewards in video games.

The removal from the National Press and Publication Administration's (NPPA) page was spotted by Reuters on Jan. 23.

The draft rules, announced last month, had caused market turmoil, leading to a nearly $80 billion drop in market value for China's top gaming companies, Tencent Holdings ADR TCEHY and NetEase Inc NTES.

See Also: Tencent Responds To China's Crackdown On Video Gaming, Doesn't Anticipate Changes

The proposed regulations included setting spending limits for online games, particularly focusing on articles 17 and 18, which aimed to ban forcing players into combat and required spending limits with a prohibition on features encouraging in-game spending.

The removal of the rules from the NPPA's website is considered unusual, according to Reuters, with analysts speculating potential revisions or changes.

Despite the lack of an official comment from the NPPA on the reason for removal, analysts note that the government might be reconsidering the proposed rules based on public feedback.

Shares in Tencent and NetEase surged following the removal of the draft rules, rising up to 6% and 7%, respectively. The unexpected move has eased investor concerns, especially after the initial panic caused by the proposed regulations.

This development follows a trend of regulatory uncertainty in China's gaming industry, with the government facing public backlash and negative reactions from investors. The removal of the proposed rules is seen as a potential effort to moderate the government's stance and address the widespread concerns within the gaming sector.

Price Action

• Tencent Holdings is currently trading at $36.09, up 5.79% over the past 24 hours.
• Net Ease is currently trading at $97.71, up 7.49% over the past 24 hours.

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Image credits: Sergei Elagin on Shutterstock.