Tencent’s on-line gaming issues in China simply obtained worse

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What you need to know about Tencent

A brand new Chinese language crackdown on on-line gaming is including to worries for Tencent.

Shares within the high Chinese language web firm dropped almost 5% in Hong Kong on Friday, after Beijing introduced plans to restrict the variety of new on-line video games and limit the period of time youngsters spend enjoying on digital units.

Tencent (TCEHY) is the world’s largest gaming firm with an enormous a part of its enterprise in China, a market the place it was already dealing with different issues attributable to regulators. Its inventory has plunged almost 30% since January, wiping out greater than $160 billion in market worth.

Chinese language authorities will “management the variety of new on-line video games, discover an age-appropriate reminder system consistent with nationwide situations, and take measures to restrict the use time of minors,” the Training Ministry introduced in a press release late Thursday. It mentioned the measures are a part of a authorities effort to scale back nearsightedness in kids and adolescents.

Tencent is already hurting from elevated regulation of the gaming business. The corporate reported a rare decline in profit earlier this month, blaming the drop primarily on regulators not approving licenses that enable firms to earn a living from new cellular video games.

Throughout an earnings name, Tencent President Martin Lau assured traders that the restrictions have been short-term. However the newest authorities announcement provides to issues about an increasingly restrictive environment for tech firms in China.

Tencent didn’t reply to a request for remark.

tencent gaming arena of valor RESTRICTED
China is the world’s largest gaming market.

Tencent has nonetheless not gained approval from Chinese language authorities to earn a living from a few of its hottest cellular video games akin to “PlayerUnknown’s Battlegrounds.” Regulators additionally blocked a recreation referred to as “Monster Hunter: World” for which huge gross sales have been anticipated. One other recreation, “Honor of Kings,” got here below intense scrutiny final yr for allegedly causing addiction in young people.

Tencent and Netease (NTES), one other main recreation developer, needs to be extra resilient to the brand new restrictions than smaller corporations, in keeping with Karen Chan, an analyst at funding financial institution Jefferies. The business heavyweights have already launched controls to control how a lot time kids spend enjoying their video games, she mentioned in a notice to traders.

However Chan acknowledged that the affect of the brand new measures on Tencent and others will not change into clear till extra particulars are introduced. Questions stay over what the restrict might be on the variety of new video games, how it is going to be applied and whether or not it is going to additional delay the approval course of, she mentioned.

Shares in Netease additionally took hit after Beijing’s announcement, closing down greater than 7% in New York on Thursday.

The ministry’s announcement additionally took intention at mother and father and educators, saying they need to scale back the time youngsters spend on smartphones and tablets and encourage kids to play and train outdoors for no less than an hour a day.

China is the world’s largest gaming market, accounting for 1 / 4 of worldwide income, in keeping with market analysis agency Newzoo. The agency forecasts China’s whole gaming income will attain $38 billion in 2018.

— Catherine Wang contributed to this report.

CNNMoney (Hong Kong) First printed August 30, 2018: 11:59 PM ET



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