Skip to main content




European and US video game stocks drop after new China suspension scare

MILAN :European and U.S. video game stocks fell on Thursday after a reported suspension of approvals for online games in China clouded prospects for new business in the world's biggest gaming market.

People with knowledge of the matter told the South China Morning Post that Beijing had temporarily suspended approval for all new online video games in a move to curb gaming addiction among young people.

Beijing last month acted to ban under-18s from playing video games for more than three hours a week, and on Wednesday government officials summoned gaming firms including Tencent and NetEase to ensure they implemented the new rules.

"It's not good news, period. It's another example of Chinese 'jenga' and the clampdown on companies with influence, monopoly, and scale," said Neil Campling, London-based head of technology, media and telecoms research at Mirabaud.

"The last gaming approval 'temporary' suspension lasted nine months. It impacted the whole sector in terms of growth and valuation compression of stocks," he added.

Shares in France's Ubisoft fell as much as 2.6per cent while Prosus, which holds nearly 29per cent of Chinese tech and gaming giant Tencent, fell more than 6per cent in Amsterdam at one point. Ebracer was last down 3.6per cent and Rovio down 2.3per cent.

Shares in U.S.-listed Roblox, Activision, Electronic Art, and Take-Two Interactive Software, dropped between 0.4per cent and 1.7per cent in early deals on Wall Street.

The fresh push by Chinese regulators whacked the share prices of Tencent and NetEase, which fell more than 8per cent and 13per cent respectively on Thursday, dragging the Hong Kong tech index to its biggest fall since the end of July.

U.S.-listed shares of NetEase and mobile game publisher Bilibili both fell 4per cent. Shares of HUYA, operator of game live-streaming platforms, slumped 7per cent and Douyu slid 5per cent.

While most of the U.S. and European companies do not break out their exposure to China, investors are concerned about the business outlook in a country crucial to their growth plans.

"Electronic Art had talked about the opportunity for Apex Mobile in China next year, Roblox has talked about China as a major growth engine going forward, and Ubisoft has been working with Tencent to get approval for The Division 2," said Mirabaud's Campling.

"The story is more about future approvals, opportunities and growth, and this is where the risk is higher."

Jefferies analysts said the crackdown in China could deliver a short-term boost to global gaming platforms, as Chinese children seek international alternatives that are harder to monitor. However, investors should expect Beijing to try and locate and close any loopholes, they added.

(Reporting by Danilo Masoni; Editing by Tommy Wilkes, Pravin Char and Mark Heinrich)

Source: Reuters


Also worth reading