China stock rout sees investors turn to state newspapers and old speeches for clues on Beijing’s next policy moves
- Beijing last week effectively obliterated the after-school tutoring industry overnight and set off a US$1 trillion global sell-off of related stocks
- Investors in China stocks need to remember to pay attention to what the government is thinking or risk getting burnt – badly
What kind of document should an investor in Chinese tech stocks in Hong Kong or New York read: an in-depth analysis of a company’s business and financials written by an investment professional or an inside page story from a Beijing-based journalist with a hot line to what senior government officials are planning, but who rarely covers stock markets?
This question became very real for investors in Chinese stocks from Tencent Holdings to NetEase this week after an investigative report by state newspaper the Economic Information Daily on Tuesday called video games “spiritual opium”, wiping about US$100 billion from Chinese gaming stocks in just a few hours. Tencent, the world’s biggest games publisher by revenue, had its biggest fall in 10 years on Tuesday.
The newspaper, which is affiliated with the official Xinhua news agency, published the article at a time when investors are becoming increasingly nervous in the wake of Beijing’s ban on for-profit tutoring and restrictions on foreign investment in the sector.
Specifically, there are jitters that gaming, a sector President Xi Jinping has previously chastised for its impact on children’s mental health, will be the target of Beijing’s next crackdown.
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Tencent narrows kids’ playing time on video games labelled ‘spiritual opium’ by Chinese state media
Losses for gaming stocks were pared back slightly after the newspaper deleted the article from its website and social media accounts, with one source close to the matter telling the Post that it had misportrayed Beijing’s policy intentions. A toned-down version of the article, without the reference to “spiritual opium”, was republished later on Tuesday evening.