Online video game stocks in China saw a rebound on Wednesday, recovering from the significant losses of the previous session. This recovery followed the commitment of China’s major gaming regulatory body to “further refine and enhance” the draft rules designed to address issues related to excessive gaming and online spending.
The National Press and Publication Administration in China had assured stakeholders in a statement via the WeChat app on Saturday that it would “carefully study” their concerns. This statement came a day after the release of new draft rules that led to a sharp decline in the stock prices of Hong Kong-listed companies, including Tencent, NetEase, and Bilibili.
Subsequently, the regulatory body, which oversees the approval of new games in the world’s largest online gaming market, announced on Monday that it had approved over 100 new local games. This followed its statement on Friday that it had approved 40 imported games.
In a memo on Tuesday, Nomura analysts expressed their view, stating, “While these measures to address concerns may provide some relief to the market, they are not sufficient to dispel the uncertainties raised by the new regulatory draft.”
During Wednesday’s session, NetEase shares surged by up to 14% in early trading as Hong Kong markets resumed after the Christmas holiday. NetEase shares ultimately closed 11.9% higher, recovering from the approximately 25% drop on Friday.
Similarly, Tencent, a competitor to NetEase, witnessed a 4% increase on Wednesday, attempting to recover from the over $43 billion loss in market value during Friday’s market downturn.
Bilibili’s shares also experienced a positive movement, rising by 6.7%. Bilibili, a social media platform, generates over 17% of its total net revenues from Chinese local games in the third quarter. The company’s shares had faced a decline of around 10% on Friday.
However, despite the stock market recovery on Wednesday, it only managed to recoup a fraction of the substantial losses incurred on Friday before Hong Kong markets closed for the extended Christmas holiday.
Concerns about the regulatory environment in the Chinese gaming industry continue to linger, as indicated by the statement from the top regulatory body on Saturday. The regulatory body emphasized its commitment to solicit opinions from various stakeholders to “continue reviewing and improving” the draft rules, with a specific focus on Articles 17 and 18 from the document released on Friday.
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