Shanghai, Aug 3 (Reuters) – China’s Tencent Holdings Ltd (0700.HK) said Tuesday it would restrict minors’ access to its flagship video game hours after its shares were beaten by a state media article describing online games as “spiritual opium”.
Economic Information Daily quoted Tencent’s “Honor of Kings” in an article saying minors are addicted to online gaming and calling for more containment of the industry. The outlet is connected to China’s largest state news agency, Xinhua.
China’s largest social media and video game company fell more than 10% in early trading and lost nearly $ 60 billion in market cap. The stock was well on its way to falling the steepest in a decade before reducing losses after the article disappeared from the outlet’s website and WeChat account.
The broadside comes days after the securities regulator and state media tried to allay investor fears about the pace and extent of market reform that sparked a sell-off in technology and private education. The CSI300 index (.CSI300) Last week, the biggest monthly loss since October 2018 fell more than 5%.
The attack on the video game sector has made investors nervous again.
“News has once again made the market concerned about industry regulation,” said Kenny Ng, an analyst at Everbright Sun Hung Kai.
“In these circumstances, it is expected that gaming stocks, and even all of technology stocks, will continue to face continued pressures to adapt,” he said, adding that the focus will shift to whether companies change their policies on underage access.
In the article, the newspaper named Honor of Kings as the most popular online game among students who played up to eight hours a day.
“No industry, no sport should develop in such a way that a generation is destroyed,” said the newspaper, comparing online video games with “electronic drugs”.
Tencent said in a statement that it would put measures in place to reduce minors’ access to games and the time spent on it. It also called for an industry-wide game ban for children under the age of 12. Continue reading
The company did not respond to the article in its statement, nor did it respond to a Reuters request for comment.
The article also hit the rivals’ stocks. NetEase Inc (9999.HK) fell more than 15% before reducing losses to about 8% lower in late afternoon trading. Game developer XD Inc (2400.HK) fell 8.2% and mobile gaming company GMGE Technology Group Ltd (0302.HK) 15.6% down.
Outside of gambling, investors were also surprised Tuesday by the State Administration For Market Regulation (SAMR), which said it would investigate autochip distributors and punish any hoarding, collusion and price gouging. The semiconductor stock index (.CSIH30184) then fell by more than 6%.
A separate opinion piece posted by the China News Service on its official Twitter-like Weibo account hours after the Economic Information Daily article took on a different tone, saying it was to blame for children’s addiction to online video games.
“Schools, game developers, parents and other parties must work together,” said the state news agency.
Chinese regulators have been trying to limit the time minors spend playing video games since 2017, and companies like Tencent already have anti-addiction systems that they believe limit the time young users play.
But authorities have put a new focus on protecting the child’s best interests in recent months, stating that they want to further strengthen the rules for online gaming and education. Last month, they banned for-profit tutoring in core school subjects and attacked China’s $ 120 billion private tutoring sector. Continue reading
This added other regulatory measures in the tech industry, including a ban on exclusive music copyright agreements for Tencent and a fine for unfair market practices. Continue reading
Sometime on Tuesday, Tencent was acquired by chip maker Taiwan Semiconductor Manufacturing Co Ltd (2330.TW).
“It showed how scary investors are today. They don’t believe anything is forbidden and will sometimes overreact to anything in the state media that fits into the tech crackdown narrative,” said Ether Yin, a partner at Beijing Advice Trivium.
“The government will not and cannot get rid of the gambling industry … The restrictions will remain, but not much room for tightening,” he said.
Reporting by Samuel Shen and Brenda Goh; Additional reporting from Yingzhi Yang in Beijing, Tom Westbrook in Singapore, Andrew Galbraith and Josh Horwitz in Shanghai; Editing by Vidya Ranganathan, Christopher Cushing and Nick Macfie
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