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Tencent, NetEase Tumble as China Halts Fresh Approvals to Games

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By Dhirendra Tripathi

Investing.com – Shares of Tencent Holdings Ltd (HK:0700) and NetEase (NASDAQ:NTES) slumped Thursday on a report in the South China Morning Post that Beijing has temporarily frozen new game approvals.

Tencent closed 8.4% lower in Hong Kong and NetEase fell 7% in premarket trading on Nasdaq, in response to the extra pressure being exerted on the companies as Beijing pursues a broader crackdown aimed at bringing powerful tycoons to heel and curbing income inequality.

The decision had a cascading impact on shares of other Chinese companies. Pinduoduo (NASDAQ:PDD) traded 4% lower in premarket, Alibaba ADR (NYSE:BABA) 3.3%, JD.com ADRs (NASDAQ:JD) fell 4.3% and Didi Global ADRs (NYSE:DIDI) fell 3.7%.

Tencent and NetEase have struggled with such bans before. In 2018 the authorities froze new game approvals on concerns that playing online games was hurting children’s eyesight.

The sell-off started with news that regulators had summoned the companies’ officials, and accelerated as reports dribbled out of a broad range of grievances aired by the authorities, including the "sole pursuit of profit", the risk of addiction among users, the concentration of market power in the sector, and "violent" and "obscene" game content as well as "money-worship and effeminacy.”

The meeting comes just ahead of new regulations coming into force that will limit children to playing videogames for no more than three hours a week, and only between Friday and Sunday. The onus of implementing the rules rests on the companies.

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