Hong Kong stocks slip as attack on online gaming ‘opium and drugs’ slams Tencent, NetEase while market awaits Alibaba earnings

Tencent’s market value has crashed by US$415 billion from its February peak, about the capitalisation of Louis Vuitton owner LVMH

Mainland investors were net sellers of Hong Kong stocks for 12 consecutive days through midday Tuesday, Stock Connect shows

Reading Time:2 minutes

Investors remain skittish on market outlook amid China’s regulatory push as mobile-gaming comes under scathing criticism. Photo: AP

Published: 10:35am, 3 Aug 2021Updated: 4:54pm, 3 Aug 2021

Hong Kong stocks declined after a publication run by the Xinhua News Agency slammed internet gaming addiction, heightening concerns that the industry could become the next target of Beijing’s regulatory wrath. Losses narrowed after the daily pulled the article.

The Hang Seng Index dropped 0.2 per cent to 26,194.82, after losing as much as 1.8 per cent. Gaming operators Tencent Holdings and NetEase tumbled by at least 6 per cent, among the market’s worst performers. Alibaba Group Holding erased losses before its quarterly earnings report. China’s Shanghai Composite Index lost 0.5 per cent.

Traders scrambled to unwind their holdings of gaming stocks after the Economic Information Daily, a newspaper of state-run Xinhua, blasted addiction among children to online games, likening them to “spiritual opium” and “electronic drugs” and singled out Honour of Kings, Tencent’s top-grossing and most popular games.

The Hang Seng Index recouped some of the earlier setbacks after the daily retracted the article from its website and WeChat account on speculation it did not represent the official view of the government.

The controversy added to jitters around Beijing’s regulatory storm, which provoked a US$1.2 trillion wipeout in market value in July. Beijing last month tackled the after-school tutoring industry after earlier trampling on technology firms. Policymakers have pointed to expensive property prices, tutoring fees and medical expenses as the major financial burdens on families.

“The uncertainty surrounding Chinese tech firms will remain high in the near term,” said Aleksey Mironenko, managing director at The Capital Company. “Investors’ anxiety on regulatory uncertainty will mean that the required risk premium on Chinese stocks is now higher. The authorities will have to clarify their true intentions to win back market confidence.”

Select Voice

Choose your listening speed

Get through articles 2x faster

1.25x

250 WPM

Slow

Average

Fast

00:0000:00

1.25x