We wrote earlier here at Askbrokers.com about how Tencent (TCEHY US) is getting hit from Chinese regulators as they had temporarily halted frozen approval of new games. Today South China Morning Post reports that the freeze will continue for an additional of 4-6 months.
Approvals of licences for new games have been suspended since the end of March, and a government source has told the South China Morning Post it may take a further four to six months
More importantly though is that the powerful Central Propaganda Department will take over the oversight of the gaming regulation. This is a material change, as the Central Propaganda Department is a key department for the Communist Party, making sure everyone follows the laws.
According to South China Morning Post it is completely unknown what type of new regulation will come through, let be quota system or entrance barriers for games. What is clear, is that the uncertainty for all gaming companies such as Tencent (TCHEY US) and Netease (NTES US) will continue. In addition, as we previously noted, regulation from the Communist Party in China will take more prominent role in the economy.
Tencent (TCEHY US) share price has continued to be lackluster over the last couple of days. This continued uncertainty will most likely linger over it and other gaming companies.
Interestingly, Tencent (TCEHY US) started to buy own shares time for the first time in 4 years. Caxin Global notes that the company is buying back 22.5k shares, which is nothing compared 9.5bn shares outstanding. It could potentially be start of bigger share buyback program, or just a company trying one last attempts show the markets that things are ok.
Tencent is as of writing this note printing just below the huge 40 level. Don’t forget Tencent is the biggest component (4.5%) of the Emerging Market ETF (EEM US).