Tencent lags rivals as curbs fears ease

Bloomberg and staff reporter

Tencent (0700) regained just some of last week's share losses after Beijing softened its stance on controversial new gaming restrictions, suggesting investors remain wary of another crackdown on the world's largest mobile arena.

Tencent climbed by 4 percent while smaller rival NetEase (9999) jumped 12 percent yesterday after the government tried to assuage the market.

Bilibili (9626), a streaming service popular with gamers, gained 6.7 percent.

Their rebound represented a fraction of Friday's US$80 billion (HK$624 billion) rout when regulators slapped sweeping restrictions on in-game spending and playing time.

Investors remain on edge following the surprise curbs, which revived fears that Beijing may again target the online content sphere.

Tencent remains down about 8 percent from before the regulations surfaced.

The government has since sought to tone down its approach. Over the weekend, state-backed media carried comments from industry groups that cast the guidelines in a positive light, while the regulator itself approved a record 105 games for domestic publication and promised to review its more controversial mandates. A slew of gaming companies have also announced share buyback plans to showcase their confidence.

"The normalized approval schedule despite release of updated 'guideline' suggests the government remains supportive on the healthy development of the online games industry," Citigroup analysts said. "It is positive for the sector to see major studios obtaining quality titles."

"Although we think the short-term sell off is likely to continue in the coming days, given investor frustration and negative read-through to internet and general China equity regulation risk, we believe the share price reaction to the Exposure Draft is overdone," said JPMorgan Chase analysts. "We expect a negative but insignificant impact on Tencent and NetEase's gaming monetization."

Meanwhile, NetEase has issued a notice, saying that minors are allowed to have only one hour of game time during the New Year holiday.

This came as a filing showed that Softbank offloaded 27.53 million shares of Chinese artificial intelligence company SenseTime (0020) for HK$34.77 million on December 19. It still held 2.85 billion shares, or a 10.97 percent stake in the firm after the disposal.