Tencent’s market value has been hammered this year by a confluence of factors, but the one that has investors and gamers most concerned is the tech giant’s regulatory woes.
China’s gaming industry – the world's largest – has effectively been left in limbo after authorities stopped approving new games amid a wider government reshuffle aimed partly at strengthening the Communist Party’s control over cultural policies. While the approval process “should restart soon” following the longer than expected suspension, Nomura analyst Shi Jialong wrote in a recent research note, Chinese gaming companies are expected to remain under closer scrutiny as authorities are increasingly concerned about undesirable content in online games.
Tencent, formerly Asia’s most valuable company, is bearing the brunt of the impact. The company still has yet to receive the necessary licenses to start charging for the mobile versions of the hugely popular battle-royale game PlayerUnknown’s Battlegrounds(PUBG), or distribute the desktop version of the game in China. More recently, it was forced to pull Monster Hunter: World from its WeGame platform because the content didn’t meet regulatory requirements. The slowdown in gaming revenue led to a rare declinein profit in the second quarter that sent Tencent’s shares tumbling and wiped out almost $150 billion in the company’s market value since its peak in January.
“At this point in time, we don’t have visibility on when exactly the official approval will start yet,” Tencent President Martin Lau said in a recent analyst call. “We do believe it’s not a matter of whether these games will be approved for monetization, but a matter of when.”
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