Chinese gaming stocks tumble after regulators summon firms

September 9, 2021

SHANGHAI (Reuters) – Chinese gaming and media stocks including Tencent Holdings and NetEase fell on Thursday a day after authorities summoned them and other gaming firms to ensure they implemented new rules for the sector.

Tencent shares shed 4% in Asia trade. NetEase’s Hong Kong-listed shares dropped 6.45% after a 5% decline in the company’s U.S. shares overnight.

Bilibili’s Hong Kong-listed shares shed more than 7%, also tracking an overnight fall in the U.S. shares of the short video sharing and gaming company.

Beijing last month moved to ban under-18s from playing video games for more than three hours a week.

The tighter gaming regulations come as China has conducted a broader crackdown on a wide range of sectors including tech, education and property to strengthen government control after years of runaway growth.

Chinese government ministries told gaming firms on Wednesday to implement these measures, to resist engaging in improper competition and focus on driving innovation instead, the official Xinhua news agency reported.

Companies should also “resolutely curb incorrect tendencies such as focusing ‘only on money’ and ‘only on traffic’, and change rules and gameplay designs that induce players to indulge,” the regulators said, according to Xinhua.

Tencent and NetEase said on Thursday they would work to be fully compliant with the regulators’ requests.

Separately on Thursday, Chinese state media cautioned investors against blindly buying Chinese stocks hoping to profit from the so-called Metaverse, saying that they will likely end up in tears.

The commentary by China’s official Securities Times comes amid a recent surge in stocks such as Shenzhen Zhongqingbao Interaction Network and Perfect World that are perceived as developing the Metaverse – a virtual shared space based on virtual reality (VR) technologies.

Shares in related stocks tumbled after the commentary was published, with Wondershare Technology falling by over 9% and Goertek down by almost 6%.

The transport ministry also said on Wednesday it would intensify a crackdown on illegal behaviour in the ride-hailing industry and deal with online platforms that are still using non-compliant vehicles and drivers.

(Reporting by Brenda Goh and Alun John; Editing by Ana Nicolaci da Costa)

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