The Uncertainty Of The Rules Of The Game In China, Makes Game Company Shares Drop

JAKARTA - Shares of video game makers from Europe and the US fell on Thursday, September 9 after reports of suspension of approvals for online games in China clouded new business prospects in the world's largest games market.

Those familiar with the matter told the South China Morning Post that Beijing is temporarily suspending approvals for all new online video games in a bid to curb gaming addiction among young people.

Beijing last month decided to ban children under 18 from playing video games for more than three hours a week. On Wednesday September 8 government officials called gaming companies including Tencent and NetEase to ensure they implemented the new rules.

"This is not good news, period. This is yet another example of China's 'jenga' and its crackdown on companies with influence, monopoly and scale," said Neil Campling, head of technology, media and telecommunications research at London-based Mirabaud.

"The 'temporary' suspension of approval of the last game lasted nine months. It had an impact on the whole sector in terms of growth and compression of stock valuations," he added.

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

US-listed Roblox, Activision, Electronic Art and Take-Two Interactive Software shares fell between 0.4% and 1.7% in early Wall Street deals.

A fresh push by Chinese regulators hit share prices of Tencent and NetEase, which fell more than 8% and 13% respectively on Thursday, September 9, dragging Hong Kong's tech index to its biggest drop since late July.

Shares of US-listed NetEase, and mobile game publisher Bilibili, both fell 4%. Shares of HUYA, operator of the game's live streaming platform, slid 7% and Douyu fell 5%.

While most US and European companies do not disclose their exposure to China. Investors are concerned about business prospects in a country that is important to their growth plans.

"Electronic Art has talked about Apex Mobile's opportunities in China next year, Roblox has talked about China as a key growth engine going forward, and Ubisoft has worked with Tencent to get approval for The Division 2," said Campling of Mirabaud.

"The story is more about approval, opportunity and future growth, and this is where the risks are higher," he added.

Jefferies analysts said the crackdown in China could provide a short-term boost to global gaming platforms, as Chinese children seek international alternatives that are harder to monitor. However, investors expect Beijing to have to try and find and close the gap.