Chinese gaming firms unveil share buybacks after regulatory move unnerves investors (updated)

NetEase

26/12/2023 07:46

(Adds analyst comment in paragraphs 6 and 7)
    By Li Gu and Casey Hall
       SHANGHAI, Dec 26 (Reuters) - A slew of smaller Chinese
gaming companies have announced share buybacks - plans seen as
an attempt to reassure investors after the market was spooked by
regulatory moves to clamp down on consumer spending on games.
    Last Friday, regulators published draft rules that would ban
online games from giving players rewards if they log in every
day, if they spend on a game for the first time or if they spend
several times on a game consecutively. All are common incentive
mechanisms in online games.
    That sent shares in gaming companies plunging and as of
Monday evening eight companies had unveiled plans to buy back
shares worth up to 780 million yuan ($110 million) combined,
citing confidence in China's gaming industry and the need to
protect investors.
    The buyback announcements come on the heels of an apparent
softening in stance by China's video game regulator - the
National Press and Publication Administration - which released a
statement on Saturday saying the government would further
improve the proposed rules after "earnestly studying" public
views.
    And on Monday, it approved new licenses for 105 domestic
online games for December - a move that some analysts said
"strongly demonstrated" that authorities remain supportive of
the development of online games.
    "The shift towards a more reconciliatory tone is quite
notable," said Charlie Chai, a Shanghai-based analyst at
86Research. 
        "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' has
made [the regulator] nervous," he added. 
    The plans for buybacks served at best to stabilise share
prices. 
    Among them, Shanghai-listed G-bits Network Technology Xiamen
 603444.SS  saw its shares end up 2% on Tuesday but has lost 11%
since the draft rules were published. Shenzhen-listed Perfect
World Co  002624.SZ  dropped 2% and has tumbled 16% since then. 
    The publication of the draft rules sparked fears that
regulators were once again cracking down heavily on the sector.
The industry has only just returned to growth this year
following the end of an extended clampdown in 2021 and 2022.
    It remains to be seen how shares of Tencent Holdings
 0700.HK , the world's biggest gaming company and its closest
rival, NetEase  9999.HK , will fare this week after the apparent
softening in stance from the regulator. 
    The two Hong Kong-listed firms lost a combined $80 billion
in market value on Friday. Hong Kong markets have been shut for
the Christmas long weekend and will reopen on Wednesday.

($1 = 7.1422 Chinese yuan)

 (Reporting by Casey Hall and Li Gu; Editing by Edwina Gibbs)
 ((Casey.Hall@thomsonreuters.com;))