The Chinese online gaming industry experienced a significant rebound in stock prices on Wednesday following the announcement by China’s top gaming regulator to “carefully study” the concerns of stakeholders regarding draft rules aimed at curbing excessive online gaming and spending. This article analyzes the implications of these regulations on the market and the recovery of major players in the industry.
After the release of the draft guidelines by China’s National Press and Publication Administration, the share prices of Tencent, NetEase, and Bilibili plummeted, reflecting investor concerns about the potential impact of these regulations. However, with the regulator’s pledge to consider stakeholder concerns, there was a resurgence in stock prices. NetEase shares saw a significant surge of up to 14% in early trading, while Tencent experienced a rebound of almost 4.5%. Bilibili, known for its social media platform heavily reliant on Chinese domestic gaming revenue, also witnessed a 2% climb.
The draft rules primarily aim to address revenue-generating practices and prohibit incentivizing daily sign-ins for games. Articles 17 and 18 of the proposed regulations are particularly scrutinized, as they propose banning forced duels between players and curtailing high-value transactions within virtual entities. Additionally, restrictions on daily login rewards and the imposition of recharging limits with pop-up warnings for “irrational consumption behavior” are outlined in the draft rules.
The release of these draft regulations adds to the ongoing crackdown on the Chinese technology industry, which began in late 2020. The National Press and Publication Administration, responsible for the publication of new games, approved over 100 new domestic games and 40 imported games, suggesting some efforts to balance regulation with industry growth. However, analysts caution that these measures may not fully alleviate the market concerns spurred by the draft regulations.
Analysts at Nomura acknowledge that the regulator’s willingness to address stakeholder concerns may alleviate some anxieties in the market. However, they assert that the impact of the draft regulations cannot be entirely eliminated. Investors and major players in the industry remain cautious about the potential consequences of these rules and the long-term implications on revenue generation and growth.
The recent rebound in Chinese online gaming stocks following the announcement of draft regulations is indicative of the volatility and sensitivity within the industry. While the regulator’s consideration of stakeholder concerns has provided some relief, the market remains uncertain about the ultimate impact of these regulations. Stakeholders will continue to closely monitor the developments and adjustments regarding the finalization and implementation of the rules, as they have the potential to reshape the landscape of China’s online gaming market.
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