Tencent market value decreased by $20 billion on Aug. 31 and its stocks fell more than 5 percent on closing trade on Aug. 30 following reports that China announced tougher regulations on online gaming sites to prevent the increasing level of myopia among children.
This comes as Tencent stock dipped nearly 30 percent since January, slashing a total of more than $160 billion in market valuation separately.
China's Education Ministry announced on Thursday that it will control the number of online games, enforced stricter age-appropriate reminders on content, and limit the allowable time that minors could engage on online games. The ministry explained that the move is in accordance with the government's effort to reduce the number of children suffering from myopia or more commonly known as nearsightedness.
The tougher restrictions were not exclusive to gaming companies. The government has also called parents, guardians, and educational institutions to limit children's access to gadgets, particularly those non-learning purposes, to 15 minutes at most, not exceeding to one hour per day. The parents should instead take kids outside to play and exercise for at least one hour a day.
The Chinese government is aiming to reduce myopia in children and teenagers by at least 0.5 percentage point each year until 2023 the ministry said. President Xi Jinping himself expressed great concerns about the growing number of children affected by the eye condition, Xinhua stated.
A National Health Commission conference in June revealed that more than 450 million Chinese people are suffering from myopia. On the other hand, China's total gaming revenue accounts for about $38 billion of the industry's global profits, CNN reported, citing data from market research Newzoo.
Tencent now has to face the tougher Chinese regulations while the gaming company has yet to get approval from the government to monetize its mobile game "PlayerUnknown's Battlegrounds." More so, China has also blocked Tencent's game called "Monster Hunter: World."
In July 2017, Tencent was already compelled to limit play time for minors who played its role-playing game "Honor of Kings" to address concerns that the game was addictive to children. At the time state-run media even described the game as "poison" to young children.
Some analysts, however, believed that the impact on Tencent stocks and valuation of the new rules are going to be temporary as the company will find a way to adapt its content.
Kevin Leung, an executive director of investment strategy at Haitong International Securities, told CNBC that China has already rolled out similar gaming policies in the past and the impact on stocks and market valuations were proven to be short term.
Alicia Yap, an analyst with Citigroup, echoed the same opinion, saying the new rules will likely dent the gaming industry's growth outlook, but high-quality gaming developers like Tencent need not worry because they will find the way to repel impact.
