Shares of South African giants Naspers and its global internet arm, Prosus, experienced a significant decline, triggered by China’s introduction of regulations targeting online games. The regulations resulted in a substantial loss of approximately $54 billion in Tencent’s market value, influencing the JSE heavily through Naspers and Prosus, given Naspers’ early investment in Tencent. Prosus currently holds just below 25% ownership in Tencent.
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Naspers had plummeted by 14%, while Prosus witnessed a decline of 13.8%.
The regulations, unveiled by Beijing’s top gaming regulator, encompass a range of measures designed to curb practices encouraging excessive spending and time spent on online gaming. The restrictions include a ban on rewards for frequent log-ins, forced player duels, and a vague prohibition on content deemed to violate state secrets.
These unexpected and sweeping measures suggest Beijing’s readiness to initiate another crackdown on the world’s largest mobile gaming market. Tencent, the major player in the industry, faced a substantial decline of up to 16%, marking its most significant intraday fall since 2008.
China’s government, led by Xi Jinping, has been proactive in addressing concerns related to gaming addiction and its perceived negative impacts, including a rise in myopia among youths and links to various societal issues. The latest regulations follow earlier freezes on approvals for new gaming titles and investigations into content, contributing to modifications in certain games by developers, including Tencent.
While there seemed to be a thaw in the sector in 2023, with the approval of major releases for Tencent, the new regulations indicate a renewed effort to regulate the gaming industry. China’s gaming market, expected to grow nearly 14% to 302.9 billion yuan ($42.4 billion) in 2023, had previously experienced a 10% decline.
The proposed regulations include setting a cap on individual player spending within a title and urging game publishers operating abroad to respect Chinese laws and culture. Tencent, as the world’s largest gaming publisher with investments in global studios, will face the impact of these regulations, with a one-month feedback period before the rules take effect.
