China gaming shares rebound regardless of regulators proscribing kids’s playtime

The NetEase Games booth at the China Joy conference in Shanghai on July 30th, 2021.

Arjun Kharpal | CNBC

GUANGZHOU, China – Major Chinese gambling stocks rebounded Wednesday despite new rules restricting play time for children under the age of 18.

On Monday, Chinese regulators announced that minors were only allowed to play online games for three hours a week, a dramatic tightening of previous regulations.

Investors have dismissed their concerns and continued to buy some of the top Chinese gambling stocks.

Hong Kong-listed Bilibili shares closed 6.25% on Wednesday and NetEase rose 6.42%. Meanwhile, Tencent was up 1.5% for the day. US-listed Huya shares closed 7% higher on Tuesday.

Companies and analysts have said the new regulations are unlikely to have a major financial impact on China’s gambling companies.

NetEase said Tuesday that less than 1% of its sales come from under 18s. Gaming is NetEase’s largest business by revenue. Analysts at investment bank Jefferies said in a release this week that it is estimated that around 5% of Tencent’s gaming revenue comes from minors under the age of 18.

Gambling regulations were brought back into the spotlight last month when a Chinese government publication affiliated with the official Xinhua newspaper published an article calling gambling “opium”.

The story was later removed and republished with references to the drug, suggesting that it may not be entirely in line with Beijing’s thinking.

Gambling rules are not new. The Chinese government has been dealing with addiction and eye problems among young people for some time.

In 2018, regulators froze approvals for new games hitting companies like Tencent and NetEase.

China’s gambling giants have sometimes tried to beat regulators by issuing guidelines before regulation. In July, Tencent said that gamers will need to do a facial scan on their phone to verify that they are adults so that children cannot disregard their play time restrictions.

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