China stocks close to 14-month low as gaming share sell-off continues

The Shanghai Composite Index is near its lowest level since October 31, 2022
Sentiment around video-gaming stocks remains fragile even as industy regulator moves to calm investors

China stock market

Zhang Shidongin Shanghai

Published: 2:25pm, 25 Dec 2023

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Corrected [10:14am, 26 Dec, 2023]

[10:14am, 26 Dec, 2023]
Removes reference to Tencent and NetEase in headline in story published on Monday

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Most Chinese stocks fell – with the benchmark hovering around a 14-month low – on Christmas Day, as a rout in online gaming stocks entered its second day even after the industry regulator sought to soothe investors’ nerves.

The Shanghai Composite Index rose 0.1 per cent to 2,918.81 at the close, near its lowest level since October 31, 2022. About three stocks dropped for every two that gained on Monday. The CSI 300 Index of the most valuable stocks on the Shanghai and Shenzhen exchanges added 0.3 per cent.

Hong Kong’s market is shut for two days through Wednesday for the Christmas holiday.

Giant Network Group tumbled by the 10 per cent exchange-imposed daily limit to 11.21 yuan (US$1.57) and Kingnet Network also plunged by that much to 9.85 yuan. 37 Interactive Entertainment Network Technology Group slumped almost 8 per cent to 18.96 yuan and Shanghai Yaoji Technology fell 7.6 per cent to 22.02 yuan.

China’s National Press and Publication Administration, the watchdog for the online gaming sector, said over the weekend that it would seek feedback from companies and players to improve and revise a draft ruling that was promulgated on Friday, and immediately triggered a meltdown in gaming stocks in Hong Kong and mainland China.

On Monday, the administration said that it had approved 105 video games, including those operated by Tencent Holdings and NetEase. The number of titles approved was the most in 17 months.

China’s Christmas gift to game developers: 105 approved titles, the most all year

The draft rules “is meant to promote the prosperous and healthy development of the industry rather than rein it in,” said Zhang Liangwei, an analyst at Soochow Securities in Shanghai. “It’s a draft ruling and not finalised. Investors should look out for progress on feedback from those involved.”

The industry’s biggest player, Tencent, and NetEase had a combined US$63 billion in market value wiped out in a single day on Friday because of the draft ruling, which was seen by some investors as a new crackdown on the internet industry. The proposed ruling imposes restrictions on how much each player can top up their account and bans game operators from rewarding players for logins.

China’s top 100 storied brands fall in value as weak economy dents demand

The fresh curbs risk adding to Chinese stocks’ woes this year – the market is among the world’s worst-performing major markets in 2023. The Shanghai Composite has lost 5.5 per cent this year and is heading for a second straight year of losses.

The CSI 300 has dropped 14 per cent on concerns about the sustainability of China’s post-Covid-19 economic recovery. A downturn in the property market and fiscal stress on local governments are the main drags on growth.

Coal producers and banking stocks rose on Monday. Huaibei Mining Holdings rallied 4.2 per cent to 17.54 yuan and Shanxi Huayang Group New Energy gained 3.3 per cent to 9.95 yuan on optimism about rising demand for the fuel in winter. China Citic Bank added 0.4 per cent to 5.28 yuan and China Everbright Bank rose 0.7 per cent to 2.88 yuan, as smaller lenders followed the industry’s biggest players in cutting deposit rates to protect their margins.

Most major Asian markets remains closed, except Japan. While the Nikkei 225 climbed 0.3 per cent, Taiwan’s Taiex index added 0.1 per cent.

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