Tencent shares fall ten percent amid crackdown fears
Chinese tech firm Tencent saw shares fall by some 10 per cent on Tuesday after the Chinese government labelled video games “spiritual opium.”
An article posted by the state-run newspaper, Economic Information Daily, warned that a “new type of electronic drug” was “advancing by leaps and bounds”.
Fears that Beijing might crackdown on online gaming sent the price of Tencent into a tailspin. Tencent Holding Ltd. lost as much as 11 per cent of its value on Tuesday and shares are down -6.36 per cent over the past 24 hour period.
Tencent’s rivals NetEase Inc. and XD Inc. also saw share prices fall in response to the article which has since been removed from the Economic Information Daily website.
The article called for stricter controls on gaming and name checked one of Tencent’s most popular titles, Honor of Kings, in an interview claiming school children play the game for up to eight hours per day.
Tencent, the company who founded WeChat, had been enjoying solid growth throughout the pandemic with lockdowns worldwide encouraging interest in online gaming. The company recorded an operating profit of Rmb42.8 billion (£4.76) in the first quarter of 2021, a year on year increase of 20 per cent.
In an effort to pacify regulators Tencent, who recently introduced facial recognition software to limit the amount of time youths spend gaming, has pledged to take further action to stop children gaming excessively.
Read more: What does China’s stock market meltdown mean for investors?