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Following a China Regulator’s Assurance on New Regulations, Tencent and NetEase Shares Rise

Chinese online gaming stocks, including Tencent, NetEase, and Bilibili, experienced a rebound in their share prices after China’s top gaming regulator stated that it would “carefully study” the concerns of stakeholders regarding draft rules aimed at restricting excessive online gaming and spending. The draft guidelines from China’s National Press and Publication Administration, released last Friday, led to a significant drop in the Hong Kong-listed shares of major gaming companies.

NetEase shares surged up to 14% in early trading after having dropped about 25% on Friday. Tencent, which lost over $43 billion in market value during the previous session, climbed almost 4.5% in early trading. Bilibili, a social media site heavily reliant on domestic gaming revenue, saw its shares rise by 2%, recovering from a 10% decline on Friday.

The draft rules propose measures such as prohibiting daily sign-in incentives, banning online games from forcing players into duels, and imposing restrictions on high-value virtual transactions. The National Press and Publication Administration, responsible for controlling the publication of new games, stated that it would carefully consider stakeholders’ concerns, particularly regarding Articles 17 and 18.

While the rebound in share prices alleviated some concerns, analysts believe that the measures may not be sufficient to completely remove the overhang caused by the draft regulation. The gaming industry in China has been facing increased regulatory scrutiny, and the latest rules add to the broader crackdown that started in late 2020. Investors continue to monitor developments in the regulatory landscape and the potential impact on the gaming sector in China.

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