A boy plays a game on a phone on a street in Shanghai, China August 31, 2021. REUTERS/Aly Song
Chinese gaming stocks tumbled on Tuesday after regulators cut back the amount of time children can play online each week to just three hours.
The Hang Seng Tech Index slid 1.5%, led by shares of Bilibili Inc. and NetEase Inc., which fell by at least 4.6% in Hong Kong after declines in their American depositary receipts. Shares of Meituan dropped as much as 2.1% as concerns over renewed regulatory crackdowns outweighed the food delivery company’s strong second-quarter revenue beat.
"The regulatory environment is clearly continuing to pose a headwind for sentiment around China’s tech stocks and it’s tough to see a light at the end of the tunnel as that requires guessing the next move by the government,” said Bloomberg Intelligence analyst Matthew Kanterman. "Until the regulatory situation has clarity towards a final resolution, the headwind will likely remain in place.”
The escalation of restrictions on gaming adds to the pain for investors in Chinese technology companies, who’ve been hit by new rules on everything from ride-hailing platforms to online commerce to data security. The latest move has also brought a halt to a spurt of bargain hunting that had helped the sector claw back some of its losses over the past week.
China slashes kids’ gaming time to just three hours a week
The new rules will only allow gaming platforms to offer services to minors from 8 p.m. to 9 p.m. on Fridays, weekends and public holidays, according to state news agency Xinhua, which cited a release by the National Press and Publication Administration. China had previously restricted gaming hours for teens to 1.5 hours per day in 2019.
The curbs in China rippled through into the Tokyo market, with Nexon Co. and Koei Tecmo Holdings Co. leading declines in Japanese videogame makers. Nexon fell as much as 5% while Koei Tecmo dropped as much as 4.4%. Nexon received about of its 28% of its revenue from China in the last fiscal year.
Chinese gaming stocks listed in the U.S. came under pressure on the news on Monday, with the American depositary receipts of NetEase, Tencent Holdings Ltd., Bilibili and Huya Inc. all falling.
The Nasdaq Golden Dragon China Index -- which tracks 98 firms listed in the U.S. that conduct a majority of their business in China -- still managed to gained 0.7% after earlier falling as much as 2.5%. Yet the gauge has dropped 29% this year, including about 47% since its record high in February.
