Tencent, NetEase lead market rout after new draft for gaming rules in China

seekingalpha2023-12-22

NetEase (NASDAQ:NTES) and Tencent's (OTCPK:TCEHY) (OTCPK:TCTZF) stock plunged on Friday after the Chinese government announced new draft rules for online gaming industry aimed at curbing the amount of...

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Gaming giant Tencent's stock fell -12.35% to HK$274, while rival NetEase slumped -24.60% to HK$122, and Bilibili (BILI) fell around 10% on the Hong Kong Stock exchange. The new rules set panic among investors and has led to a wipe out of about $80B in market value from the three China's companies, according to a Bloomberg report. South Africa-based Naspers (OTCPK:NPSNY) fell about 17% on the Johannesburg Stock Exchange and shares of Prosus (OTCPK:PROSY) (OTCPK:PROSF) which owns a stake in Tencent, fell about 17%. Naspers holds a stake in Prosus. The National Press and Publication Administration, or NPPA, has brought out draft rules and is seeking opinions on the the same. As per the draft rules, online games would not be allowed to set inductive rewards such as daily login, first-time recharge, and continuous recharge. All online games must set user recharge limits and announce them in their service rules. Pop-up warnings should be issued to users for irrational consumption behavior. The rules also include caps on the amount each player can spend within a game. Online game publishing business units should strictly control the time and duration for minors to use online games. In addition, the draft rules also say that games must not contain content — promoting obscenity, pornography, gambling, violence or instigating crimes; insulting or slandering others and infringing upon others' legitimate rights; endangering national unity and sovereignty, among other things. The new draft rules caught the industry and investors by surprise and reminded many of a crackdown on the tech-sector in 2021. That years certain agencies imposed restrictions on sectors from e-commerce to entertainment, reining in Jack Ma-backed Ant Group and Alibaba (BABA), among others. As per the NPPA the draft rules are aimed to standardize the order of the online game industry, protect the legitimate rights and interests of users, protect the physical and mental health of minors, and promote the healthy and orderly development of the online game industry. In August, the Cyberspace Administration of China drafted guidelines for preventing minors from spending too much time on their smartphones, dealing a potential blow to social media providers. Other stocks in the red on Friday: Kuaishou Technology (OTCPK:KUASF) (OTCPK:KSHTY) fell about 7% to HK$50.1, Weibo (WB) down about 3% to HK$76.8, Baidu (BIDU) about 1% down, Alibaba (BABA) around 2% on the Hong Kong exchange. The Chinese companies' stocks on U.S. exchanges are also trading lower premarket — NetEase (NTES) slumped about 24%, Bilibili around 11% Alibaba, Baidu JD.com (JD) down around 3%. Editor's note: The draft rule document was translated to English from the local language, thus the words may not be an exact match.  More on NetEase and Tencent  NetEase: A Strong Defensive Stock In China's Intensely Bearish Landscape Tencent: Only Chinese Tech Giant You Should Own (Via A Dutch Holding) Tencent: Deep Value For Long-Term Investors Biggest stock movers today: Rocket Lab, NetEase, Nike and more Tencent closes US video game studio: report","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2393493948"}