Picture: 123RF/POP NUKOONRAT
Picture: 123RF/POP NUKOONRAT

Shanghai — China’s Tencent says it will curb minors’ access to its flagship video game, hours after its shares were battered by a state media article that described online games as “spiritual opium”.

Economic Information Daily cited Tencent’s “Honor of Kings” in an article in which it said minors were addicted to online games and called for more curbs on the industry. The outlet is affiliated with China’s biggest state-run news agency, Xinhua.

China’s largest social media and video game firm saw its stock tumble more than 10% in early trade, wiping almost $60bn from its market capitalisation. The stock was on track to fall the most in a decade before trimming losses after the article vanished from the outlet’s website and WeChat account.

The broadside comes days after the securities regulator and state media sought to soothe investor fears over the pace and breadth of market reform that sparked a sell-off in technology and private education. The CSI300 index last week fell more than 5% for its biggest monthly loss since October 2018.

The attack on the video game sector put investors back on edge.

“News once again caused market concerns about industry regulation,” said Everbright Sun Hung Kai analyst Kenny Ng.

“Under this circumstance, it is expected that game stocks and even the overall technology stocks will still face continuous adjustment pressure,” he said, adding focus will shift to whether firms change their policies for minors’ access.

In the article, the newspaper singled out “Honor of Kings” as the most popular online game among students who, it said, played for up to eight hours a day.

“No industry, no sport, can be allowed to develop in a way that will destroy a generation,” the newspaper said, likening online video games to “electronic drugs”.

Tencent in a statement said it will introduce measures to reduce minors’ access to and time spent on games. It also called for an industry ban on gaming for children under 12 years old.

The article also hit rivals’ shares. NetEase dropped more than 15% before paring losses to sit 8% lower in late afternoon trade. Game developer XD fell 8.2% and mobile gaming company GMGE dropped 15.6%.

Outside gaming, investors were also caught offguard by the state administration for market regulation on Tuesday saying it would investigate vehicle chip distributors and punish any hoarding, collusion and price-gouging. The semiconductor stock index subsequently fell more than 6%.

Child wellbeing

The government has vowed to strengthen rules on online gaming and education to protect child wellbeing. Last month, it banned for-profit tutoring in core school subjects, attacking China’s $120bn private tutoring sector.

That added to other regulatory action in the technology industry, including a ban on Tencent from exclusive music copyright agreements and a fine for unfair market practices.

At one point on Tuesday, Tencent was briefly dethroned as Asia’s most-valuable firm by market capitalisation by chipmaker Taiwan Semiconductor Manufacturing.

“It showed how investors are jumpy these days. They don’t believe anything is off limit and will react, some times overreact, to anything on state media that fits the tech crackdown narrative,” said Ether Yin, partner at Beijing-based consultancy Trivium. “The government will not and cannot get rid of the gaming industry. Restrictions will stay but not much room to go tighter,” he said.

Reuters

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