Tencent's Market Value Plunges by $43.5 Billion Amidst China's New Online Gaming Regulations.
In a surprising turn of events on Friday, Tencent experienced a staggering loss of approximately $43.5 billion in market value following the unveiling of fresh regulatory guidelines by China.
The draft rules, issued by China’s National Press and Publication Administration, sent shockwaves through the Hong Kong-listed shares of Tencent, NetEase, and Bilibili – key players in the world's largest online gaming market.
This unexpected regulatory development has left the market apprehensive, with Brian Tycangco, an analyst at Stansberry Research, expressing concerns.
According to Tycangco, while the regulations may have good intentions, they cast uncertainty on the sustainability of existing business models, which heavily rely on incentives and rewards to attract users and foster loyalty.
Tencent, headquartered in Shenzhen and known for owning WeChat, faced a notable setback, with its shares plummeting approximately 12.4% to close at HK$274.
This marks its lowest closing level since the end of November 2022.
The impact of China's regulatory intervention reverberates not only in the market but also raises questions about the future landscape of the lucrative domestic online gaming sector, which contributed over a fifth of Tencent's third-quarter revenue.