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Tencent vows fresh gaming curbs after 'spiritual opium' attack zaps $60 billion

EconomyAug 03, 2021 04:01PM ET
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2/2 © Reuters. FILE PHOTO: A Tencent logo is seen at its booth at the 2020 China International Fair for Trade in Services (CIFTIS) in Beijing, China September 4, 2020. REUTERS/Tingshu Wang/File Photo 2/2

By Brenda Goh and Samuel Shen

SHANGHAI (Reuters) -China's Tencent Holdings (OTC:TCEHY) Ltd said on Tuesday it would further 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.

The broadside re-ignited investor fears about state intervention after Beijing had already targeted the property, education and technology sectors to curb cost pressures and reassert the primacy of socialism after years of runaway market growth.

"They don’t believe anything is off limit and will react, sometimes overreact, to anything on state media that fits the tech crackdown narrative,” said Ether Yin, partner at Trivium, a Beijing-based consultancy.

China's largest social media and video game firm saw its stock tumble more than 10% 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 on Tuesday afternoon. The article later reappeared later in the day with the historically loaded term "spiritual opium" removed and other sections edited. The stock ended down 6.1%.Shares of European and U.S. gaming companies also took a hit.

Activision Blizzard (NASDAQ:ATVI) which has the largest exposure to Chinese markets among its U.S. peers and was due to report after the closing bell, was down 3.8%.

Electronic Arts (NASDAQ:EA), the company behind Sims, was down 2.8%. Take-Two (NASDAQ:TTWO) Interactive Software, which gave an annual forecast late on Monday that disappointed investors, was down 7.6%.

Shares of Amsterdam-listed Prosus (OTC:PROSF), which holds a 29% stake in Tencent, fell 6.9%, while European online video gaming stocks Ubisoft and Embracer Group fell about 5% and 3.7%, respectively.

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

"'Spiritual opium' has grown into an industry worth hundreds of billions," the newspaper said. "No industry, no sport, can be allowed to develop in a way that will destroy a generation."

Opium is a sensitive subject in China, which ceded Hong Kong island to Britain "in perpetuity" in 1842 at the end of the First Opium War, fought over Britain's export of the drug to China where addiction became widespread.

Tencent in a statement said it will introduce more measures to reduce minors' time and money spent on games, starting with "Honor of Kings". 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 Reuters request for comment.

The article also hit rivals' shares. NetEase (NASDAQ:NTES) Inc dropped more than 15% before paring losses to end down 7.77%. Game developer XD Inc fell 8.1% and mobile gaming company GMGE Technology Group Ltd dropped 13.59%.

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%.

CHILD WELLBEING

The reposted Economic Information Daily article, in a shift of tone, said that authorities, game developers and families had to work together to combat child addiction to online video games, and parents had to be responsible for supervision.

Chinese regulators have since 2017 sought to limit the amount of time minors spend playing video games and companies including Tencent already have anti-addiction systems that they say cap young users' game time.

In practice, it is difficult for companies to stop children accessing games online because users can lie about their age.

But authorities have in recent months placed fresh focus on protecting child wellbeing, and said they want to further strengthen rules around online gaming and education. Last month, they 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 de-throned as Asia's most-valuable firm by market capitalisation by chipmaker Taiwan Semiconductor Manufacturing Co Ltd.

Tencent vows fresh gaming curbs after 'spiritual opium' attack zaps $60 billion
 

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Comments (7)
Limin Tandiono
Limin Tandiono Aug 03, 2021 7:14PM ET
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https://www.bloomberg.com/news/articles/2021-08-03/-china-model-aims-for-prosperity-without-democracy-quicktake-krvqxxd0?srnd=premium-asia
Limin Tandiono
Limin Tandiono Aug 03, 2021 7:14PM ET
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Democracy is not the only way, and may not be the best as well. At least, it works for China.
Limin Tandiono
Limin Tandiono Aug 03, 2021 7:13PM ET
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https://www.bloomberg.com/news/articles/2021-08-03/-china-model-aims-for-prosperity-without-democracy-quicktake-krvqxxd0?srnd=premium-asiaDemocracy is not the only, and may not be the best as well. At least, for China.
Klaus Weyers
Klaus Weyers Aug 03, 2021 4:10PM ET
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you could have gotten a job as prooaganda minister in ******Germany
Limin Tandiono
Limin Tandiono Aug 03, 2021 11:20AM ET
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Westerner will never understand this, using democracy as an excuse that everybody can do whatever they want, and government has no right to tell what is right or wrong in personal life. But to Chinese confucius value, it is not only about economic growth. It is about how to drive the entire civilization living in decent life, a proper manner of upbringing kids. Economy eventually will also benefit from a decent and ordered society. This is not about communist vs democracy. Most westerners may never understand this.
Matt Terry
Matt Terry Aug 03, 2021 9:22AM ET
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I'm against anything having to do with the PRC, but I can say first-hand that these mobile games are designed specifically to addict people and such them dry of money and time.
Benjamin McIntire
Benjamin McIntire Aug 03, 2021 8:24AM ET
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America went through the same ***** Video games are mad addictive and it makes parents uneasy. China just has a more authoritarian and reflexive government so this should be interesting.
IceIce Baby
IceIceBaby Aug 03, 2021 2:57AM ET
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It seems China is destroying its own stock market in a wide range. But no surprise, they are communists. I just need popcorn and coke. :)
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Sean Nolan
Pendragon Aug 03, 2021 2:57AM ET
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I guess China doesynt have far to fall. Waiting on the US rug pull next.
alex gallegos
alex gallegos Aug 03, 2021 2:57AM ET
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Students wasting their time playing games is not a healthy correction.
akljsdf askldf
akljsdf askldf Aug 03, 2021 2:57AM ET
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Communist is great at value destruction, just look at Soviet, Venezuela, Cuba etc. can always count on them for that
Limin Tandiono
Limin Tandiono Aug 03, 2021 2:57AM ET
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China discipline its "naughty" companies that potensially do harm to society. To chinese value, this is not only economic growth. This is about upbringing kids in a proper manner and living a descent life. This in turn, eventually will support proper dan real economy growth.
Limin Tandiono
Limin Tandiono Aug 03, 2021 2:57AM ET
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Democracy should actually offer a better solution to Communism. But how many often we see democracy has turned into demo-crazy ?
 
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