China's Tencent Holdings said on Tuesday it would 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 per cent in early trade, wiping almost $60 billion 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 fear over the pace and breadth of market reform that sparked a selloff in technology and private education. The CSI300 index last week fell more than 5 per cent 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 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 company did not address the article in its statement, nor did it respond to a request for comment.
The article also hit rivals’ shares. NetEase dropped more than 15 per cent before paring losses to sit around 8 per cent lower in late afternoon trade. Game developer XD fell 8.2 per cent and mobile gaming company GMGE Technology Group Ltd dropped 15.6 per cent.
Outside of gaming, investors were also caught off guard by the State Administration For Market Regulation (SAMR) on Tuesday saying it would investigate auto chip distributors and punish any hoarding, collusion and price gouging. The semiconductor stock index subsequently fell more than 6 per cent.
The government has vowed to strengthen rules around online gaming and education to protect child wellbeing. Last month, it banned for-profit tutoring in core school subjects, attacking China’s $120 billion 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, sometime overreact, to anything on state media that fits the tech crackdown narrative,” said Ether Yin, partner at Beijing-based consultancy Trivium.
“Government will not and can not get rid of the gaming industry . . . Restrictions will stay but not much room to go tighter,” he said. – Reuters