Tencent's value drops by $20 billion following new Chinese regulations
Company has lost more than $160 billion in value this year, falling behind rival Alibaba Group
News that China's government hopes to combat myopia in children by limiting both the amount of time spent playing games and the number of games being released have taken a toll on Tencent's market value.
Reuters reports the holdings firm saw its value plummet by $20 billion after the Ministry of Education made its recommendations, sparked by fears that heightened regulations on online titles will damage Tencent's games business.
Shares of Tencent fell by 5.4 per cent in the wake of the Ministry's notice, down by 4.9 per cent when trading closed. Several other Chinese video game companies were also affected.
As a result, Tencent has slipped behind arch rival Alibaba Group and is now the second biggest company in Asia, based on market capitalisation.
Tencent has already demonstrated its concern for the health of children playing its games, last year introducing time limits for the hugely popular Honor of Kings. It later confidently claimed this would not hurt game revenues.
It's yet another challenge for the internet services provider, which has reportedly lost more than $160 billion in its market value since January. The ongoing restructure for the State Administration of Radio and Television, which handles game approvals before they are allowed to be distributed in China, has also hindered the firm's business, as no new approvals have been given since April 2018.
In Tencent's most recent financials, the company blamed this lack of new launches for the first quarterly decline in profits in over 12 years. However, profits for the first six months of the year are still up 25 per cent.
Approvals are expected to resume once the SART restructure is complete - estimated by Niko Partners as the end of September - but it's not clear what impact the new regulations the Ministry has recommended will have on the games industry or firms like Tencent.