A mobile phone shows the screen of Tencent Games company’s stock decline on December 22, 2023 in Suqian city, Jiangsu province, China.
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Chinese online gambling stocks rose on Wednesday, recouping some losses from the previous session, after the country’s top gambling regulator pledged to “further modify and improve” draft rules aimed at curbing excessive online gambling and spending.
On Saturday, China’s National Press and Publication Administration also vowed to “carefully consider” stakeholders’ concerns in a WeChat statement, a day after new rules it proposed sent Hong Kong-listed shares of Tencent, NetEase and Bilibili plummeting brought.
The regulator, which also controls the release of new games in the world’s largest online gambling market, said on Monday it had approved more than 100 new domestic games, after saying on Friday it had approved 40 imported games.
“We believe these firefighting measures can help alleviate some of the market’s concerns, but they are not enough to eliminate the overhang caused by the draft regulations,” Nomura analysts said in a note Tuesday.
On Wednesday, NetEase shares rose as much as 14% in early trading as Hong Kong markets returned from the Christmas holidays. NetEase ended Wednesday up 11.9%. The stock was down about 25% on Friday.
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NetEase shares in Hong Kong
Rival Tencent rose 4% on Wednesday after losing more than $43 billion in market value in Friday’s bankruptcy. Bilibili, a social media site that derived 17.1% of its total net revenue from domestic gaming in China in the third quarter, rose 6.7%. Its shares were down about 10% on Friday.
However, Wednesday’s recovery in stock prices only recouped a fraction of Friday’s steep losses before Hong Kong markets closed for a four-day long Christmas weekend.
In its statement on Saturday, China’s top online gambling regulator said it would continue to seek the opinions of various stakeholders to “further modify and improve” the published draft rules, specifically mentioning Articles 17 and 18 in the am Document published Friday.
In fact, these two articles underscore a key goal, which is to prohibit incentivizing daily game logins and other revenue-generating practices.
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Tencent Holdings shares in Hong Kong
These two articles would prohibit online games from forcing players to duel other players, while requiring online game owners not to offer or tolerate high-value or expensive transactions in virtual units, whether through, among other things, auctions or speculative activities .
Daily login rewards would also be banned and reload limits would be required, with pop-up warnings issued to users who engaged in “irrational consumer behavior,” the draft rules from the National Press and Publication Administration said.
These latest draft rules come as the broader Chinese tech industry was just emerging from a broader crackdown that began in late 2020.
— CNBC’s Evelyn Cheng contributed to this story.