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Tencent shares fall as Chinese ministry discusses tougher gaming regulation

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Tencent shares are lower Monday, continuing the slide begun last week following news the Chinese Ministry is planning to further tighten its gaming regulations.

The news comes as research highlights increased eye problems among China’s youth, which is being blamed on too much study and electronic device use, versus too little outdoor exercise.

By 0745 BST, Tencent shares were 2.59% lower at HKD331.20. The stock slumped 5% on Friday – reducing its market value by some $20 billion – immediately after the news.

Tencent’s gaming future under threat?

Like other gaming related tech business in China, Tencent has been dogged by a lack of approvals for new gaming releases in the country. This new announcement from China’s Ministry of Education likely explains the country’s reticence on the matter.

Specifically, the Ministry noted an increase in Myopia – or near-sightedness – among its youth. It attributes that to a combination of issues, including the popularity of mobile phone and electronic devices use among that age group.

To combat these growing problems, China’s ministry of education has recommended the implementation of more control over the number of new, online video games in the country. It also recommends a new age ratings system for the games, as well as formal restrictions on how long children are able to play those games.

Blow follows disappointing earnings

This news follows a disappointing earnings release for the Chinese tech business. Tencent’s second quarter profits slipped 2% compared with Q2 2017. Analysts noted that, surprisingly, its gaming sector weighed on the results.

However, while China withdrew its approval for a new Tencent game, Monster Hunter, just one week after giving it, its thought that these regulatory problems will likely settle down – after some changes are brought in.

And, while Tencent will be hurt in the short-term by the possible new regulatory rules, it could gain over the longer run. That’s particularly likely to be the case if smaller Chinese tech and gaming businesses are unable to withstand the new, tougher rules.

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