Tencent Shares Spike as China Watchdog Flags Video Game Approvals

Tencent Holdings's shares surged on Friday after a local regulatory official said some new video games had been cleared for sale, ending a lengthy freeze in approvals that has spooked players in the world's largest gaming market.

Feng Shixin, a senior official of the ruling Communist Party's Propaganda department, said in a speech at a gaming conference in the southern city of Haikou that a first batch of approvals for games had been completed, according to a transcript of the speech and the organisers of the event.

That helped propel Tencent's shares up by as much as 4.6 percent, putting the gaming-to-social media giant on course for its steepest daily share price jump in over a month.

China stopped approving new titles from March amid a regulatory overhaul triggered by growing criticism of video games for being violent and leading to myopia as well as addiction among young users.

The freeze on new approvals has pressured gaming-related stocks and clouded the outlook for mobile games, rattling industry leader Tencent and peers like NetEase.

"We hope through new system design and strong implementation we could guide game companies to better present mainstream values, strengthen a cultural sense of duty and mission, and better satisfy the public need for a better life," Feng said.

Earlier this month, state media reported that Chinese regulators had set up an online video games ethics committee, raising hopes the government was preparing to resume an approval process that has been frozen for most of this year.

"This is clearly exciting news for China's gaming industry," a Tencent spokesman said in written comments.

"We're confident that after the publishing licence approval, we will provide more compliant, high-quality cultural works to society and the public."

The gaming freeze in China has dragged down Tencent's shares this year and wiped billions of dollars off its market value. The firm's stock is down more than 20 percent in 2018.

According to a Hainan propaganda department official at the gaming event, a new pilot approval mechanism is set to be rolled out in the tropical province, which would include positive and negative lists, combining artificial intelligence audits and expert censorship.

Some industry insiders, however, said they remained cautious to see what the new mechanism would look like in action.

"While there is no clear legislation on video game regulation, it's up to the regulator to decide what they pass and what they don't. There is still a lot of uncertainty," said an executive at Tencent's game division, asking not to be named.

© Thomson Reuters 2018