Shares of Chinese gaming giants NetEase Inc. and Tencent Holdings Inc. experienced a sharp decline on Friday following the announcement of draft rules aimed at cracking down on spending and rewards in online gaming.
Proposed Regulations
China’s National Press and Publication Administration, the top gaming regulator in the country, outlined several measures aimed at curbing excessive spending and restricting rewards in gaming. The regulations would discourage users from overspending and prohibit rewards from multiple logins and pop-up rules. Additionally, the draft rules emphasized the importance of preventing the leakage of “state secrets” within game content.
Market Impact
The news immediately impacted the stocks of NetEase, with shares plummeting by 22%, and Tencent, which experienced a 12% decline. This downward trend had a negative effect on the Hong Kong Hang Seng Index, which was down 1% as a result. It is worth noting that Tencent is the parent company of Tencent Music Entertainment Group.
Challenging Times for Chinese Shares
This latest development adds to China’s ongoing struggle in the stock market, as Chinese shares have been among the worst performers in both Asia and globally in 2023. The Hang Seng Index, for instance, has experienced a consistent decline for four consecutive years and is currently down by 16%.