Tencent Holdings dived as much as 10% Tuesday after an offshoot of China’s official news agency decried the “spiritual opium” and “electronic drugs” of games, stoking fears Beijing will next set its sights on online entertainment.
The social media giant joined rivals NetEase Inc. and XD Inc. in an abrupt selloff in early Hong Kong trading after an outlet run by the Xinhua News Agency published a blistering critique of the gaming industry. The Economic Information Daily cited a student as saying some schoolmates played Tencent’s Honor of Kings -- one of its most popular titles -- eight hours a day and called for stricter controls over time spent on games.
It spooked investors already on edge after Beijing came down hard on online industries from e-commerce to ride-hailing, triggering a global selloff of Chinese shares that at one point surpassed $1 trillion. Nervous investors continue to reevaluate their holdings as they ponder the longer-term ramifications of a crackdown on firms from Jack Ma’s Ant Group Co. and Alibaba Group Holding Ltd. to Tencent-backed Meituan and Didi Global Inc.
“No industry or sport should prosper by eradicating an entire generation,” the Xinhua article said, citing an academic at a state-backed institution.
The concerns are bleeding over to Japanese gaming stocks as well. Shares of Nexon Co., which gets about 28% of its revenue from China, dropped as much as 8.1%, the most since May 13 and their lowest since May 2020.
On July 27, Tencent said it was suspending new user registrations for its WeChat messaging super-app, prompting concerns about Beijing’s intentions for the gaming industry leader. China’s most valuable corporation has run afoul of regulators in the past, most notably in 2018 when watchdog agencies clamped down on gaming addiction and temporarily suspended monetization licenses, walloping Tencent’s main business.
Investors fled Tencent and its internet peers over past weeks after China announced its toughest-ever curbs on the online education industry and issued a series of other edicts governing illegal online activity and food delivery.
Xi Jinping’s government has over the past nine months embarked on a series of crackdowns on China’s most influential private-sector companies over issues ranging from antitrust to data security, as it seeks to rein in the tech giants’ influence over most of everyday life.
