Chinese gaming firms unveil share buybacks after regulatory moves unnerve investors. Several smaller Chinese gaming businesses have announced their intentions to buy back their shares. These plans are being seen as an attempt to calm investors after the market was shaken up by regulatory actions to restrict the amount of money consumers spend on games.
On Friday of last week, authorities issued a draft of guidelines that would prohibit online games from providing players with prizes if they check in daily, spend money on a game for the first time, or spend money on a game several times in a row. In online games, all of these are examples of standard incentive systems.
This caused the stock prices of gaming businesses to plummet, and as of Monday evening, eight companies had announced their intention to buy back shares for up to 780 million yuan ($110 million). They cited their faith in China’s gaming sector and the necessity to safeguard investors.
The National Press and Publication Administration, China’s video game regulator, appeared to change its position on Saturday by declaring that the government would improve the proposed rules after “earnestly studying” public opinions. The announcements of buybacks come on the heels of this apparent shift in stance.
In addition, on Monday, it granted fresh licenses for 105 domestic online games for December. According to the opinions of some experts, it is “strongly demonstrated” that the authorities continue to support the growing popularity of online games.
“The shift towards a more reconciliatory tone is quite notable,” said Charlie Chai, an analyst with 86Research located in Shanghai.
“Apparently the magnitude of that ‘mini rebellion’ by capital markets on Friday caught the regulator off guard, and allegations of backpedalling on previous commitments to ‘responsible policymaking that instills investor confidence’ have made [the regulator] nervous,” said the commissioner.
At best, the proposals for buybacks worked to stabilize the pricing of the company’s shares. G-bits Network Technology Xiamen (603444. SS), listed on the Shanghai Stock Exchange, saw a 2% increase in its share price on Tuesday, although it has seen an 11% decline since the draft guidelines were published. Shenzhen-listed Perfect World Co. (002624. SZ) saw a dip of 2% and has seen a decline of 16% during that time.
The release of the proposed guidelines aroused concerns that the industry will again be subjected to a significant amount of repression from the regulatory authorities. As a result of the prolonged crackdown that took place in 2021 and 2022, the industry has just recently begun to see growth this year.
After what appears to be a shift in posture from the regulatory body, it is unclear how the shares of Tencent Holdings (0700. HK), the largest gaming firm in the world, will do this week. NetEase (9999. HK) is the company that Tencent Holdings finds itself most closely competing with.
On Friday, the market capitalization of the two Hong Kong-listed companies dropped by a combined total of 80 billion dollars. The markets in Hong Kong have been closed for the Christmas holiday weekend, and they will return on Wednesday.
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