New China Draft Rules for Online Gaming Send Chinese Stocks Sharply Lower

Chinese gaming stocks are sharply lower Friday after the Chinese government announced new draft rules for online gaming industry. Tencent’s stock fell -12.35% to HK$274, NetEase dumped -24.60% to HK$122, and Bilibili (BILI) fell around 10% on the Hong Kong Stock exchange. The stocks continued to slide heading into the US opening. Netease fell to 81.69 -22.72 (-21.76%) Pre-Market. BILI 10.32 -1.25 (-10.80%) Pre-Market. The new rules are aimed curbing the amount of money and time players spend playing the games. Alibaba, Baidu and JD.com are also down around 3%.

Netease Attacked

National Press and Publication Administration (NPPA) Draft Rules

  • Online games would not be allowed to set inductive rewards such as daily login, first-time recharge, and continuous recharge.
  • All online games must set user recharge limits and announce them in their service rules.
  • Pop-up warnings should be issued to users for irrational consumption behavior.
  • Caps on the amount each player can spend within a game.
  • Online game publishing business units should strictly control the time and duration for minors to use online games.
  • Games must not contain content promoting obscenity, pornography, gambling, violence or instigating crimes; insulting or slandering others and infringing upon others’ legitimate rights; endangering national unity and sovereignty, among other things.

The NPPA the draft rules are aimed to standardize the order of the online game industry, protect the legitimate rights and interests of users, protect the physical and mental health of minors, and promote the healthy and orderly development of the online game industry.

The move follows the August Cyberspace Administration of China drafted guidelines for preventing minors from spending too much time on their smartphones, dealing a potential blow to social media providers.

The new draft rules caught the industry and investors by surprise, reminding of a crackdown on the tech-sector in 2021. Restrictions on sectors from e-commerce to entertainment, hitting in Ant Group and Alibaba (BABA), among others.

With that Kuaishou Technology (KUASF) (KSHTY) fell about 7% to HK$50.1, Weibo (WB) down about 3% to HK$76.8, Baidu (BIDU) about 1% down, Alibaba (BABA) around 2% on the Hong Kong exchange.

Source: Reuters

From The TradersCommunity News Desk