Gaming players seek rebound

Staff reporter and Bloomberg

Shares of Chinese gaming companies might see a moderate rebound today following a US$80 billion (HK$624 billion) selloff after the surprise imposition of new gaming curbs last Friday, but investors are advised to stay away from the sector, at least for now.

Chinese officials rekindled fears that they will start another round of tech crackdowns after the top gaming regulator announced on Friday new rules to limit the development of online games, including an unspecified cap on spending by adult players.

Additional restrictions include a ban on rewards for frequent log-ins and forced player-duels, and even a prohibition on content that violates national security.

Tencent (0700) slid as much as 16 percent - its biggest intraday fall since 2008 - while NetEase (9999) dived a record 28 percent at one point on Friday.

Although the administration said on Saturday that it will listen to feedback from stakeholders including companies and players to improve the rules, analysts believe big names like Tencent and NetEase will be under pressure for a while.

"This makes investors remember the nightmare from a few years ago when the government tried to regulate mobile games' playing time," said Steven Leung, an executive director at UOB Kay Hian. "With these new rules, investors may just leave the market totally, because the policy risk is too high."

Still, the country approved 105 domestic games on Monday, including those operated by Tencent and NetEase, an indication that Beijing is softening its stance.

A slew of smaller gaming companies have announced share buybacks but their share performance remained mixed yesterday in the A-shares market.