Chinese Gaming Bonanza Ignites Tencent, Asian Gaming Rally

Youkyung Lee and Sarah Zheng, Bloomberg News

An illuminated logo at the Tencent Holdings Ltd. headquarters in Beijing, China, on Tuesday, March 16, 2021. China’s top leader warned that Beijing will go after so-called "platform" companies that have amassed data and market power, a sign that the months-long crackdown on the country’s internet sector is only just beginning. Photographer: Yan Cong/Bloomberg , Bloomberg

(Bloomberg) -- Tencent Holdings Ltd. joined a rally in Asian gaming stocks Thursday after China green-lit its latest clutch of blockbuster titles, reinforcing hopes Beijing is easing a crackdown on the world’s largest mobile gaming arena.

Tencent was the top performer on the Hang Seng Tech Index Thursday, gaining as much as 3% after winning nods for a half-dozen titles including esports favorite Valorant and Pokemon Unite, developed in tandem with Nintendo Co. It was only the second time the Chinese tech giant gained licenses for blockbuster titles since Beijing resumed issuing them in April.

The latest round of approvals also included several Korean games, suggesting regulators are relaxing their stance on foreign entertainment. Netmarble Corp. surged as much as 24% in Seoul — the most on record — after a Ni No Kuni title won approval, driving gains of between 5% and 12% in rival developers including Krafton Inc. and Nexon Co. in Tokyo.

“It was the first time since 2016 that Korean online games got approvals on a big scale,” Ahn Jaemin, an analyst at NH Investment & Securities, said in a note. “The resumption of approval will give a positive momentum to the game industry overall.”

Read more: Tencent Wins Nod for Blockbusters as China Crackdown Softens

Beijing launched a campaign to rein in its tech industry’s growing power in 2021. The subsequent clampdown, which ensnared sectors from e-commerce to fintech and even education over a tumultuous year, spread to online gaming around August 2021.

Regulators introduced stringent measures, such as capping play time for minors to a mere three hours a week, and imposed other requirements aimed at curbing addiction.

Growth at industry leader Tencent evaporated as the company found itself struggling to wring new revenue from aging cash cows such as Honor of Kings. This month, co-founder Pony Ma upbraided Tencent’s employees for slacking on the job and lacking urgency, a rare show of frustration for the billionaire.

Ma’s outburst unnerved observers accustomed to his even-keeled handling of Asia’s biggest social media and gaming company, raising concerns Tencent was in for another tough year.

Still, during an analyst call in November, a Tencent executive expressed confidence in winning approval to release more major games soon. This month, China removed its remaining Covid Zero curbs, spurring optimism the world’s No. 2 economy will rebound in 2023.

NetEase Inc., Tencent’s smaller rival, also won approval for its Fantasy Life in December’s batch.

(Updates with a chart)